Question

Using your understanding of the laws and supply and demand and the operation of how the pricing system regulates economic activity, explain how a free market would respond in the following situations. In each case, what would be the result for the society?

What would happen if there was no regulation of post-secondary tuitions and colleges and universities could charge whatever they wanted?

What would happen if the Ontario Government didn’t operate Ontario Power Generation (OPG) to produce electricity and the production and sale of electricity to meet market demand was left to private companies?

What would happen in domestic markets if Canada didn’t impose any tariffs (taxes on imports into Canada)?

What would happen if the government didn’t regulate the price of retail gas at the pum

Answer 1

1) What would happen if there was no regulation of post-secondary tuitions and colleges and universities could charge whatever they wanted?

Ans : If there would be no regualtion on post secondary education tuitions and colleges then because of huge demand the universities and colleges would end up charging very high price.This will reslut in only few school graduate children getting post secondary education and that too at high price. This would also reduce the positive externality that post secindary education bring hence this competitive free market will not graps the external benefit.

2) What would happen if the Ontario Government didn’t operate Ontario Power Generation (OPG) to produce electricity and the production and sale of electricity to meet market demand was left to private companies?

Ans; Again because of less supplier and private supplier only and with huge demand of electricity the price owuld be raised very high upto which the private players wil get maximum of profit. This will end up with only few people having access to electricity at high price and again positive externality will be reduced.

3) What would happen in domestic markets if Canada didn’t impose any tariffs (taxes on imports into Canada)?

Ans; If Canadadoes not impose imprt tariffs then it owuld do harm to domestic sellers. At l ower price exporters from other countries may supply goods to Canada and obviously at lower price Canadian will demand more of foreign goods. This step will also make consumers having more choices leading to lower bargaining power of domestic sellers. Eventually beacuse of free trade the world price (which would be lower) will get imposed in Canada.

4) What would happen if the government didn’t regulate the price of retail gas at the pum

Ans; If retail gas price does not get regulated the price will shoot up ending up with few people getting gas at high price.