Question
In: Economics
Many states require barbers and beauticians to be licensed. Using the public interest theory of regulation...
Many states require barbers and beauticians to be licensed. Using the public interest theory of regulation as a base, what, if any, arguments could you make to support such a regulation? Do you think consumers gain from such regulations? Why not just allow anyone to open up a barber shop or beauty salon?
Solutions
Expert Solution
public interest theory of regulation focuses to promote the welfare of people and helps prevent market failure. Using this theory, a licensed barbers and beautician will be trained, skilled and well informed professionals to deliver the hygienic and quality services to the consumers. Here, license is used to screen out those individuals who are poorly skilled and do not know about customer care. So, licensing of these professionals is good for the society.
Consumers gain in terms of better and quality services, but they have to pay more now as these service providers are licensed and they will put higher price as supply of these professionals decreases in the market. So, consumer surplus decreases.
If everyone is allowed to open barber shop or beauty parlor, then chances of getting poor treatment, injuries and infections will be more. It can make these shops to be focal point of spreading the infectious disease like AIDS and Corona Virus.
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