Question

What, legally and economically, sets regulated industries apart from other industries?

Answer 1

Regulation is a major way in which government influences the economy. Rgulations are specific laws or rules, specific standards or instructions concerning what individuals or organisations can or cannot do. A regulated market is the one where the government controls the forcces of supply and demand and the prices to be charged. An unregulated economy is one where prices of goods and services are set by the forces of the demand and supply.

Below are the reasons that set regulated industries apart from the other industries:

1. There is an elegant efficiency in the market price system allowing resources to low naturally to their highest valued uses. The government can correct prices through interventions and policies. This improves economic and social outcomes.

2. Principles based regulatory approaches have the advantage to being more adaptable to the changes in economic condition and opportunities.

3. Regulations also help to reduce entry barriers and encourage greater competition and innovation.

4. A regulated market has greater transparency in the information and distribution of products and services as compared to non regulated industry.

5. Regulated industries are more vibrant and competitive as compared to ones that are not regulated.

However as the saying goes that every coin has two sides, sometimes the regulations may be burdensome, inefficient, inappropriate and not justified. Regulated markets have to bear greater cost and comply to all the rules as compared to the unregulated industries.