Regulation
Definition
This is any form of
interference with the operation of the free market.
Methods
of regulation
a.
Audit
b.
Rules and regulations
c.
Price ceilings and floors
Costs
of regulation
1.
Enforcement
cost-
to ensure the regulations are complied with
a. Direct enforcement cost-
incurred by the regulator
b.
Indirect
enforcement cost- incurred by the regulated companies
2. Regulatory capture
Big
firms can influence regulations pertaining to them in their favour.
Advantages
a. Increases
stakeholders’ confidence
b.
Companies in very important industries
not likely to fail
Not-for-profit
Bodies
They are usually
subject to a lower degree of regulation