I can explain why governments sometimes need to step in and regulate the economy.
I can describe how government laws protect consumers and ensure fair competition.
I can give examples of when government intervention is needed.
In the small town of Maple Glen, people prided themselves on their clear lakes and natural springs. For years, clean water was easy to access and practically free—until a long summer drought changed everything. With wells drying up and the local reservoir at its lowest level in decades, residents became increasingly dependent on bottled water.
Skywater Bottling Co., the only local bottled water supplier, saw an opportunity. As demand rose, they began raising their prices—from $5 a 5 galon jug to $10, then $15, and eventually $20 per jug.
“We’re just responding to market forces,” said the CEO in an interview. “We’re a business, not a charity. If people need water, they’ll pay for it.”
Families began to struggle. Some had to choose between buying enough water and buying food. Local health clinics reported an increase in dehydration-related visits. When asked if they would lower prices, Skywater refused. “It’s not our fault there’s a drought. If anything, we’re providing a vital service,” the company insisted.
Eventually, protests erupted outside the Skywater plant. Some called for government regulation, arguing it was unethical to profit from desperation. Others said the company had a right to charge whatever it wanted in a free market.
Now that we are done reading the story, we will go over the answers to these questions together. I will ask the questions and you will talk about it with your desk partner for a minute. Then we will bring your thoughts back to the class to discuss.
Do you think Skywater Bottling Co. should be allowed to set its own prices without government interference? Why or why not?
At what point, if any, should the government step in?
Is it fair to say that the company is “just responding to supply and demand”?
Can you think of any real-life examples where price increases caused problems for people?
What might happen to a market if there were more companies competing with Skywater?
How does this story show the strengths and weaknesses of a market economy?
What would change if water were provided by a government-run company instead of a private business?
Do consumers have any power or responsibility in this situation? Why or why not?
Carousel Activity:
When you have finished, you will be circulating through each question on the poster paper to respond to each question. You will have 1 - 2 minutes at each station.
As a class we will discuss the responses when all stations have been completed.
Competition - When multiple producers try to sell the same or similar goods or services to consumers.
Monopoly - When one producer controls all or most of the market for a product or service, limiting competition.
Price Fixing - An illegal agreement between businesses to set prices at a certain level, rather than letting competition determine them.
Public Interest - The well-being of the general public, often used to justify government intervention in the economy.
Government Regulation - Rules or laws set by the government to control how businesses operate.
Governments don’t usually run the economy—but they intervene when needed to protect people and keep the economy fair and safe. Here's how and why:
Protecting the Public Interest
Sometimes businesses act in ways that are good for their profits but harmful to people. The government steps in to protect the public interest—which means doing what’s best for the health, safety, and general well-being of all citizens.
📌 Example: Requiring warning labels on tobacco products, banning unsafe chemicals in food, or ensuring access to clean water.
Preventing Monopolies
A monopoly happens when one company controls an entire market and there is no competition. This can lead to higher prices and poor service since consumers have no other options. The government may block mergers or break up companies to prevent this.
📌 Example: If one internet company controls all access in an area, customers have no choice but to accept the price and quality they offer.
Stopping Price Fixing
Price fixing is when companies secretly agree to charge the same high price for a product instead of competing fairly. This is illegal in Canada. The government passes regulations (rules or laws) to stop companies from doing this.
📌 Example: If all gas stations in a city agree to charge $1.85/L no matter what, the government could investigate and fine them.
Creating and Enforcing Regulations
Government regulations are official rules or laws made to protect consumers, workers, and the environment. These rules ensure that businesses operate fairly, products are safe, and companies cannot take advantage of people.
📌 Example: Food safety laws that require meat to be inspected before it’s sold.
Promoting Competition
Competition means many businesses are offering similar products or services and trying to attract consumers. This leads to better prices, better quality, and more innovation. The government encourages competition so that no single business has all the power.
📌 Example: Letting smaller cellphone companies use larger networks so Canadians can get better deals.
Complete the multiple choice while watching the video and answer the reflection questions after.