Mergers and Acquisitions Econ
Melinda Drugatz
Econ – Mergers and Acquisitions
Strayer University Professor Dastmalchi
August 21, 2012
Explain why government regulation is needed, citing the major reasons for government involvement in a market economy.
A free market economy is driven by individual innovation and the notion that hard work and ingenuity will be rewarded by success. Scarce resources are allocated through the price mechanism where the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals meaning when demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply to meet rising demand from consumers. All businesses exist to make a profit. Therefore, in the free market system, a successful business makes a consistent profit in a field of competitors. The concept of competition is an important component of a free market system. Competition in the marketplace provides the best possible product to the customer at the best price. When a new product is invented, it usually starts out at a high price, once it is in the market for a period of time, and other companies begin to copy it, the price goes down as new, similar products emerge. In a competitive market, the poor versions of the product or the overpriced will be pushed out of the market because consumers will reject them.
“The government may choose to intervene in the price mechanism largely on the grounds of wanting to change the allocation of resources and achieve what they perceive to be an improvement in economic and social welfare. All governments of every political persuasion intervene in the economy to influence the allocation of scarce resources among competing uses” (IMACB 2012). Some of the main reasons for government intervention are to correct market failure, achieve more equal distribution of income and wealth as well as improve our economic
Econ – Mergers and Acquisitions
Strayer University Professor Dastmalchi
August 21, 2012
Explain why government regulation is needed, citing the major reasons for government involvement in a market economy.
A free market economy is driven by individual innovation and the notion that hard work and ingenuity will be rewarded by success. Scarce resources are allocated through the price mechanism where the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals meaning when demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply to meet rising demand from consumers. All businesses exist to make a profit. Therefore, in the free market system, a successful business makes a consistent profit in a field of competitors. The concept of competition is an important component of a free market system. Competition in the marketplace provides the best possible product to the customer at the best price. When a new product is invented, it usually starts out at a high price, once it is in the market for a period of time, and other companies begin to copy it, the price goes down as new, similar products emerge. In a competitive market, the poor versions of the product or the overpriced will be pushed out of the market because consumers will reject them.
“The government may choose to intervene in the price mechanism largely on the grounds of wanting to change the allocation of resources and achieve what they perceive to be an improvement in economic and social welfare. All governments of every political persuasion intervene in the economy to influence the allocation of scarce resources among competing uses” (IMACB 2012). Some of the main reasons for government intervention are to correct market failure, achieve more equal distribution of income and wealth as well as improve our economic
References: ICMAB. (2012, May 4). Explain the rationale of government intervention in international business. Retrieved from http://www.icmab.net/explain-the-rationale-of-government-intervention-in-international-business/ Harding D. and S. Rovit, (2004), “Building deals on bedrock,” Harvard Business Review: 121-128. Achieving success in international aquistiions. (2009). Retrieved from http://www.qfinance.com/mergers-and-acquisitions-checklists/achieving-success-in-international-acquisitions Gottschaig, O. F. and A. A. Pe 'er, (2008), “Forethought: Do politics shape buy out performance?” Harvard Business Review: 26-27. Moubousin, M. (2011 , Octomber 11). Maximizing shareholder value. Retrieved from http://blogs.hbr.org/cs/2011/10/ceos_must_understand_what_crea.html Gole, W. J. and P. J. Hilger, (2008), “Managing corporate divestiture transactions,” Journal of Accountancy: 48-52.