In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S1: Supply curve of automobiles prior to regulation
S2: Supply curve of automobiles after regulation
FG: Clean up cost per unit
-Any kind of social regulation raises the per unit cost of production of a good and hence leads to a loss of producer and consumer surplus.
Definitions:
Identification of the Goods
The process of specifying or distinguishing goods to be covered by a sales or service contract.
Special Property Right
A legal right granted to an individual or entity over an intangible asset, such as intellectual property or a trade secret.
Fungible Goods
Items that are interchangeable and indistinguishable from one another in terms of quality and characteristics, making them easily replaceable.
Bona Fide Purchaser
A person who purchases property in good faith without notice of any prior claims, liens, or encumbrances.
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