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Microeconomic Policy
Exercise 3
Outline TWO microeconomic polices that could be used to increased efficiency and productivity.
Some or all of the following can be included in your answer.
- Deregulation involves the removal of laws and
restrictions that affect the efficient allocation of
resources and operation of markets. Previously regulated
industries are now exposed to the market forces of supply
and demand and may need to improve productivity and
efficiency levels to remain viable. The deregulation of the
financial sector in 1993 and the telecommunications and
aviation industries are good examples.
- Industry assistance in the form of tariffs and quotas
impose economic costs by distorting the patterns of
production and consumption. Scarce resources are allocated
to inefficient industries, consequently lowering total
output. The effects on the economy are higher consumer
prices for some goods and higher input and production costs
for producers.
There has been a considerable decline in the rates of industry assistance over the past ten to twenty years, particularly in manufacturing. The average rate of protection is now around 5%. This has generally reduced costs, improved productivity and produced a pattern of production that better reflects consumer demand.
- Deregulation involves the removal of laws and
restrictions that affect the efficient allocation of
resources and operation of markets. Previously regulated
industries are now exposed to the market forces of supply
and demand and may need to improve productivity and
efficiency levels to remain viable. The deregulation of the
financial sector in 1993 and the telecommunications and
aviation industries are good examples.
- Corporatisation requires GBEs to introduce management practices that are similar to private enterprise. Increased efficiency and productivity should generate profits for the government owners. Privatisation is the partial or whole sale of GBEs to individuals or businesses. Privatised businesses face increased competition with government controls removed and may need to increase productivity and efficiency to survive.
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