Chapter 9, Problem 19AA

To determine

To state: The Advantages and disadvantages of an industry regulated by government.

Answer to Problem 19AA

Electricity industry is one of the industries regulated by the government.

Explanation of Solution

Regulations are significant as they provide a set of direction and instructions to the businesses to perform. It structures the operations of the business. Had regulations not been imposed on the businesses, many companies can indulge themselves in unethical practices.

Along with advantages, it also has some disadvantages. If the regulations are stricter, it will increase the cost of the business. Also, it makes it difficult for the business to change according to the change in the demand. Therefore, most of the times, regulations create problems for the business.

In my opinion, this industry should be regulated by government as electricity is a basic need for the consumers. If government will not regulate it, then many other companies can use it to their advantage where they will be concerned only with the profits and not the well-being of the society.

Economics Concept Introduction

Introduction: In a government monopoly, the state, central or local governments are only permitted to provide certain product or service because any competitors for such product or service is legally prohibited.