Strategy
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Explanation
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Advantages
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Disadvantages
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Trade liberalisation
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- Removing the barriers to international trade such as tariffs, quotas etc.
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- More trade increases output, employment & incomes
- Lowers costs of production for firms
- May result in lower prices for consumers
- More efficient global allocation of resources
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- Global competition intensifies and some firms may fail
- There may be an element of structural unemployment as inefficient industries die out
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Privatisation
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- Government firms are usually so big that private enterprise refrains from trying to compete with them. Privatisation encourages new firms to enter the market & compete, thus increasing the total supply in the economy
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- May increase competition leading to an increase in output, employment & incomes
- Private firms may be more efficient than government firms
- Competition may result in cheaper prices for consumers
- The money from the sale of assets can be used to provide more merit and public goods
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- Government assets are often sold off cheaply at prices below fair market value
- The quality of services may deteriorate as private firms focus on profit maximisation
- Unemployment may increase as private firms seek to cut their wages in order to maximise profits
- Prices may actually rise as firms provide a monopoly service e.g. rail travel
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Deregulation
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- This is the process of removing government controls/laws from markets in order to increase competition
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- Any regulation increases costs of production for firms and deregulation decreases costs which may result in greater supply
- Less regulation may result in innovation and more enterprise in an economy
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- Deregulation may create an environment of corruption leading to inefficiency
- Deregulation may increase the quantity of negative externalities
- Deregulation may allow foreign firms to monopolise industry within the nation, leading to higher prices and less output
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