Evaluate measures that a government could introduce to promote competition and contestability

Edexcel International A-Level Economics Unit 3 January 2025

In 2007 the Government of Indonesia set up the Kredit Usaha programme. The aim of this programme was to support small businesses by offering subsidies and low-cost loans. In 2022 the amount that a business could borrow was increased significantly. Evaluate measures that a government could introduce to promote competition and contestability. (January 2025)

Plan

• Paragraph 1
  • Argument: one way to promote competition is by offering tax breaks to smaller businesses
  • Diagram: fall in costs
  • Evaluation: opportunity cost, small businesses could become dependent on tax breaks/subsidies to survive
• Paragraph 2
  • Argument: another way to promote competition is through dereguulation
  • Diagram: decrease in AR and MR for the market leader
  • Evaluation: deregulation only reduces legal barriers to entry but not other barriers entry such as branding or high economies of scale

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