This is when the government intervenes and puts up measures which seek to regulate the activities of a particular industry. For instance the government can put a limit on the number of vehicles that can be exported within a certain period. A company which exports beyond set limits will be breaking the law. The government use agencies and law enforcers to ensure that the industry follows the set regulations.
Regulations occur because industries if left alone without regulation would exploit the consumer by charging high prices so as to increase on their profits. Thus the government intervenes so as to protect the customer. Industrial regulations are also brought about by government seeking to protect infant local industries which do not have the financial and economic advantages compared to the large multinational companies. Hence the government restricts importation of the products manufactured by local industries so as to give them a chance to market and sell their products (Giorgi & Noia & Piatti, 2000).
Effects of industrial regulation to the market:
The market reacts differently depending on the goal of the regulatory goals and objectives. If the aim was to protect the consumer by preventing the traders from hiking prices, then the traders might reiterate by reducing the level of production and thus creating a shortage. This usually happens if the producers and the traders were not necessarily making huge profits
If the regulations were put in place after an agreement between the various players in the market, then it will be accepted. As a result products will be sold in a fair and reasonable price hence increasing their demand. Consequently the producers will produce more to satisfy the huge market. Thus the market will grow and expand.
Entities affected by industrials regulations in terms of market structures:
There are various forms of market structures which include; perfect competition, monopoly, duopoly and oligopoly. The most affected structure by industrial regulations is the monopolies because the strongest purposes of industrial regulation is to promote competition, hence when applied the environment for monopoly to grow is eliminated or reduced giving chance to competition to thrive.
An oligopoly market structure is also greatly affected by industrial regulations. This is because the few firms which control the market are forced to abide by the regulations put in place thus resulting to a fair competition amongst all the firms. Hence the regulations make sure that all firms in the industry operate using the same rules thus reducing the oligopoly used by the few dominant firms.
Social regulations are the measures put in place to protect public interest such as health, safety, environment and social cohesion. The regulations have economic effects even though they are not primary or substantial economic effects. They are put in place requiring all the firms and industries to...