Theory question 107
Government and BusinessThe state of Kabada was operating a transport company that became inefficient and was running at a loss. To ensure efficiency, the government decided to stop its subvention and tasked management to make profit.
(a) Name the policy adopted by the state.
(b) State four possible causes of the inefficiency of the transport company.
(c) State two advantages and three disadvantages of deregulation.
Show the model answer
(a) Commercialization.
(b) Any four: political interference in management; corruption and mismanagement of funds; lack of profit motive; poor maintenance of vehicles; overstaffing and unqualified staff; bureaucracy and slow decisions; inadequate funding; monopoly (no competition); poor attitude of workers.
(c) Advantages (any two): encourages competition and efficiency; attracts private investment; better quality and variety of services; market forces set prices; reduces government spending.
Disadvantages (any three): prices may rise; private monopolies may exploit consumers; essential services may be neglected in unprofitable areas; job losses; quality may fall without control; foreign dominance of the economy.
Government keeps ownership but tells management to make profit = commercialization.