gcse economics - tools of the trade: privatisation - case studies
Case study of the telephone industry
Scenario A
Initially British Telecom was owned and controlled by the government it was the only supplier of telephone lines in the country. It had a monopoly.
Scenario B
The industry was privatised. BT was sold to private individuals and is now owned by shareholders as a public limited company. Also other firms were allowed to provide telephone lines for the public.
ADVANTAGES OF PRIVATISATION |
DISADVANTAGES OF PRIVATISATION |
It created competition. This should help reduce prices |
BT still makes huge profits. These go to ‘fat cat’ directors
and shareholders |
Firms have aimed to increase quality e.g. extra features on phones |
BT still has a monopoly in the market. It is difficult for other firms
to get established |
The government doesn’t have to pay for BT therefore
taxes should be lower |
A lot of people lost their jobs after privatisation as BT needed to
become more efficient |
Case study of the Derby to London rail route
Scenario A
Initially, the government under the name of British Rail provided this service
Scenario B
The route was privatised it is now operated by Midland Mainline ("MM")
ADVANTAGES OF PRIVATISATION |
DISADVANTAGES OF PRIVATISATION |
The government doesn’t have to pay for British
Rail. Taxes should be lower |
Only MM can operate trains on this route. There is no proper competition |
MM need to make profits. They need to provide a high quality service
to persuade people to travel by train |
They have a monopoly on this route. They could charge high prices as
there are no rail substitutes |
The sale of BR raised money for the government to spend on other things |
They may decide to only offer profitable services. They may cutback
on night services |
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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