Regulation
Definition. Regulation is a form of government intervention that uses rules and laws to control the behaviour of producers or consumers in order to correct market failure. Examples include bans, licensing requirements, maximum emission limits, and standards that compel firms to behave in the socially desirable way.
Regulation can directly reduce activities that generate negative externalities, but its effectiveness depends on monitoring and enforcement, and setting the correct standard is difficult without accurate information.
This term belongs to Government Intervention in Markets in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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