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Technology retailers mislead shoppers with Black Friday 'deals' - Leaving Cert Economics - Question (b) - 2021
Question (b)
Technology retailers mislead shoppers with Black Friday 'deals'. A survey of 'before and after' pricing shows that many products are not discounted as claimed. Adapt... show full transcript
Worked Solution & Example Answer:Technology retailers mislead shoppers with Black Friday 'deals' - Leaving Cert Economics - Question (b) - 2021
Step 1
Explain why misinformation to consumers by technology retailers represents a market failure in this industry.
Answer
Misinformation can lead to what is known as an information failure, which is a type of market failure. In this context, consumers do not have access to accurate information about pricing, making it difficult for them to make informed purchasing decisions. This lack of information puts consumers at a disadvantage, as they may likely overpay for products believing they are getting a deal, when in reality, prices have not changed.
Additionally, when technology retailers intentionally mislead consumers, it can result in the misallocation of resources. Consumers might choose to spend their money based on false information, which leads to inefficient market outcomes as the equilibrium price and quantity may not reflect underlying consumer demand and product value.
Step 2
Evaluate how Government intervention in this market could address this market failure.
Answer
Government intervention can play a crucial role in addressing the market failure caused by misinformation in several ways:
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Increased public awareness: The government could allocate resources to promote consumer information websites. Initiatives like www.citizensinformation.ie would enhance consumer knowledge and reduce misinformation in the future, helping consumers become aware of pricing and sales practices.
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Government legislation/regulation and enforcement: Implementing new regulations to govern misleading pricing practices can help protect consumers. The Consumer Protection Act 2007 could be updated to enforce stricter repercussions against retailers who engage in deceptive practices, ensuring the market operates fairly.
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Increased penalties for offenders: Stricter penalties for those who mislead consumers can act as a deterrent. If potential offenders are made aware of the consequences they could face, they may think twice before engaging in dishonest practices.
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Increased accuracy of information: Governments can require retailers to publish their pricing strategies, making it mandatory for them to inform consumers of past prices, ensuring better accuracy in future transactions.
Step 3
Explain, giving an example, one advantage of a government regulation.
Answer
One key advantage of government regulation is the protection of consumers from harmful practices. For example, regulations that require transparency in pricing can prevent technology retailers from misleading consumers during sales events like Black Friday. This protects consumers from overpaying due to false discounts and ensures fair trading practices. Consequently, this can enhance consumer trust and confidence in the market, leading to better market functionality and fairness.