How Economic Systems Attempt to Allocate Resources Effectively - Assignment Example

? BUSINESS ENVIRONMENT By Location Introduction Global economies depend heavily on the variations in demand and supply of resources. Mainly, the two variables are arguably important in determining any significant growth or slump in the economy. Further, pricing of the resources is depended to the economies market structures for example, a market that allows the existence of monopoly differs from that economy which enforces monopolistic or oligopolistic competitions. A view into the perfect market competition approach accrues different results for the immediate economy. Therefore, it is sound to assert that the variations in demand and supply for any economic resources, and the country’s practices contribute to its growth and competence at a global platform. The following discussion seeks to highlight economic perspectives in different versions with reference to their effects to the economic environment. P4: Explanation of how economic systems attempt to allocate resources effectively Despite the two country’s economic practices, UK practices the mixed enterprise approach whereby some resources belong to the national government thus limiting any probable exploitation of the citizens (Dransfield, 2004, p. 98). For instance, the country owns majority of the shares in those firms operating in products, which seem critical for human welfare. Such a resolution enables the UK to expressly influence companies’ decision-making processes in for the benefit of the citizens’ benefit. Further, the UK is able to use the mandate expressed by its constitution’s to influence the privatization of companies in order to create wealth to the citizens. Individuals own the remaining resources, but there are regulations enforced by the government to ensure that that the practices are ethical and beneficial to the citizens. On the contrary, the military command economy restrains the local population from the exclusive indulgence into businesses that may lead to the exploitation of resources for economic prosperity. Arguably, the country owns 95% of the industries leaving a 5% margin for its citizens. The socialist approach thus tends to practice a monopoly approach in the allocation of resources, a factor that deters increment in the GDP and leads to increased poverty levels. Economists explain that U.S.A sets an analytical approach to the economic issues and establishes fiscal policies to stimulate growth, control amount of money in supply, dictate inflation rates of the dollar, and subsequently reduce the unemployment levels. The United States is observant on whether the factors will affect the country positively or negatively in the end (Arnold, 2007, p. 55). Analysts describe that the US free market enterprise economy allows for the room of innovation thus; the country’s entrepreneurs have the ability to improve products that in turn lead to economic growth since they are able to earn returns on their investments, create employment, and remit taxes to the federal government (Rodrik, 2007, p. 67). P5: The impact of high taxes and high interest rates The influence of high taxes on employees is a factor born from the Keynesian theory. Theoretical arguments are that enforcement of high taxes to a country’s employee population is a significant approach to reducing the rate of inflation since the approach diminishes the rate of individual expenditures. The factual further increases productivity in the economy since the government’s accrued revenues are spent on utilities such as infrastructure, and the provision of other resources to the entire population (Arnold, 2007, p, 58). The approach is significant in shaping up an economy in accordance to changes in demand and supply with a perception that whenever the supply shifts to an increase or decrease, the prices will remain constant since the population will bear the existing ability to purchase a given quantity of a product. On the other hand, the impact of executing high interest to business organizations remains an ill monetary approach since it may lead to the utmost deterioration of an economy. During such occasions, businesses will be unable to diversify their investments since the entities shall be lacking the desired capital base to engage in the programs. The resolution shall deter the desired growth in the country’s gross national product since the available businesses shall not be able to exploit the resources as expected thus leading to reduced per capita incomes. P7: Explanation of pricing and product output decisions as determined in a perfect market structure Pricing and output decisions in perfect market structures are dependent on the variations of supply and demand in the market. Arguably, economists ascertain that the market structure comprises of many firms. Such a credential ascertains on the absence of a single firm to cater for the demand of all clientele in the population. Secondly, perfect markets comprise of price takers. The purpose of price takers is to purchase the present products at the stipulated price despite the power of demand and supply utilities. Economists are out that price takers have the expressive capacity to order goods from any of the available firms depending on their choices, and without the aspect of coercion or influence since they have perfect knowledge concerning the markets’ offers. Suppliers also represent other group that tends to determine prices and product output in the market since they have the honorary mandate to decide the amount of goods that they would produce to meet the needs and wants of consumers in the market (Jones, 2013, p. 46). Arguably, the informed buyers and sellers often deal with homogeneous products thus; they are capable of affecting perfect market pricing practices. P8: Illustration of the market forces and their impacts to organisational responses Market forces lead to the escalation or slump in either the demand or supply of a product. The forces also lead to changes in the prices of products’ units of consumption. Mainly, these impacts emanate from the in needs and wants of the buyers in the market. The housing sector of any global economy suffers broadly because the human population develops needs and wants in relation to the housing sector with reference to their incomes, availability of tenure, and desire to improve the living standards (Dransfield, 2004, p. 108). Since housing is a critical element that economists perceive as a basic need, the prevailing demand and supply variations affect a country’s economic state. In cases whereby an economy witnesses a gradual increment in construction of houses while the demand is constant, the organizations often engage in execution of reduced charges for the housing services as a mode to draw the required rate of clientele to make purchases. Therefore, organizations increase the prices of housing to their clientele whenever the demand for such utilities increases (Rodrik, 2007, p. 87). Organizations also engage in the construction of more housing utilities in order to cater for the demand. A conclusive approach establishes that the engagement in construction continues until the demand is exploited, a state referred to as the optimum point. P9: Justification of how the business and cultural environments shape the behaviour of organisations such as a fast food shop, a Turkish restaurant, and an Indian restaurant Since different societies exhibit different characteristics depending on their social beliefs and practices, it is obvious that the practices shall extend to affect the demand and supply utilities of products. Mainly, culture defines the consumption patterns of products, and organizations should be knowledgeable of a market segment’s cultural practice since its effects may affect business progressions in the short and long runs. Fast food shops have the advantage to survive in Turkey holding that most of the famous words used in naming the various types of snacks emanate from the country’s language (Arnold, 2007, p, 65). Mainly, Turkish nationals often embrace highlife in the night thus; they show an insatiable appetite for hamburgers and kebabs as it has been the norm of the society since the beginning of the 14th century. Arguably, fast food organizations for example the Burger King and McDonalds are capable of earning increased returns after investing in the community. However, the case is different in the Indian community since the culture restrains majority of the Indian population from consuming animal products in their diets (Ricci & Volkmann, 2002, p. 78). Such cultural perceptions often influence the demand of products and the first food restaurants may fail to acquire the desired reputation once in the market since the locals may readily associate them with the provision of foods rich in animal products. P10: Significance of international trade to the UK The purpose of international trade is to ensure that countries bear the ability to purchase those products that lack in their economy while yielding the advantage of selling their surplus products to participating foreign economies. Since the United Kingdom lacks comparative advantages in most of the agricultural products, the nation depends on importation of the resources from those countries that have surplus amounts of the products. For instance, the country is unable to rear enough chicken to feed the 56million population thus; it depends mainly on importation of the entity from Brazil (Musgrave, 2006, p. 28). This practice enables the UK to meet the demand of chicken emanating from its broad population without suppressing its domestic industries in order to gain enough space to allow for the commercialization of chicken rearing. Secondly, UK benefits from international economies through the importation of agricultural problems such as coffee and bananas. The nation also depends on international trade for the importation of raw materials for example, iron, soda ash, titanium, and other products that are important in the production of finished goods. Therefore, UK benefits broadly from international trade since it is able to utilize its space for the production of more profitable utilities while outsourcing such products from foreign nations with reference to the available demand of the products. Economically, international trade has served as the most significant practice that has always ensured UK’s dominance as a competent global economy despite its dependence on importation of products, which totals to over 60% of the goods used in the economy. P11: Analyse the impact of global factors on UK business organisations The global demand and supply factors often affect business organizations in terms of acquiring the outlined revenues and growth utilities. Therefore, an economy might face challenges since differences do occur in the prices of those products that an economy has comparative advantages. Similarly, economies suffer in meeting its market demand for products which are imported. For instance, UK business organizations may be incapable to price their imported bananas using the same pricing mechanisms used by the countries of origin (Dransfield, 2004, p. 116). Organisations such as Tesco, Asda, Aldi, and Morrison have engaged in price rivalry concerning the product. UK imports its bananas from Africa, Asia, and the Caribbean economies. Dominican Republic serves as the largest exporter of bananas to the UK, and in the recent past, farmers have been in the limelight claiming that the EU should reconsider its annual remittances. Currently, the annual total earnings are roughly within the range of ?100million, but farmers are enquiring for an increase to ?500million claiming that the cost of production has increased over the profits and they might be unable to engage in the business. This course of price escalations has led to the increment in the prices of imported bananas with expert surveys showing that the unit cost per kilo of the product have increased by ?1. P12: The impact of two policies of the EU on UK business organizations The European Union has set its obligations in ensuring that the affiliated economies practice equally sound directives in executing obligations to their local industries. One of the most famed approaches of the EU is the employment regulation policy whose estimated budget cost the organization over ?3 billion. Arguably, the policy restrains UK employees’ freedom and the exclusive rights to demand for salary increment as stipulated in the country’s economy. The policy further affects growth of the UK economy since economies often depend on the surplus savings of the employee population for investments. Therefore, the constraint deters rapid economic growth and investment, thus leading to stagnation of the GDP and per capita income margins (Porter & Malloch, 2011, p. 90). Secondly, the EU’s mobility of labour approach restrains growth of the UK economy since the local population finds itself competing for common opportunities with the foreigners. These two policies essentially affect the welfare of the organisations and that of the employees. Conclusions In conclusions, perceptions are that the highlighted approaches may resolve or restrain the off-shelving process of the fiscal cliffs by short-term tax cuts. The economic practices also shall be indicated to benefit the business rather than the consumers upon whose spending the country shall establish the desired GDP because of the increased incomes of the consumers (Ricci & Volkmann, 2002, p. 88). The study has revealed the interdependence of the UK’s economy with other global economies while still showing the effects of market forces to economies. Bibliography Arnold, R, A, 2007, Microeconomics, Ohio, Thomson South-Western. Dransfield, R, 2004, Business for Foundation Degrees and Higher Awards, Oxford, Heinemann. Great Britain, 2005, UK Employment Regulation, London, the Stationery Office Ltd. Jones, E, 2013, Negotiating Against the Odds a Guide for Trade Negotiators from Developing Countries, Basingstoke, Palgrave Macmillan. Musgrave, F, W, 2006, The Economics Of U.S, Health Care Policy: The Role Of Market Forces, Armonk, N.Y, M.E, Sharpe. Porter-O'grady, T, & Malloch, K, 2011, Quantum Leadership: Advancing Innovation, Transforming Health Care, Sudbury, Ma, Jones & Bartlett Learning. Ricci, R, & Volkmann, J, 2002, Momentum: How Companies Become Unstoppable Market Forces, Boston, Mass, Harvard Business School Press, C2003. Rodrik, D, 2007, One Economics, Many Recipes Globalization, Institutions, and Economic Growth, Princeton, Princeton University Press. Read More