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  • Subject Name : Economics

Table of Contents

Answer 1.

Answer 2.

Answer 3.

Answer4.

Reference List

Business Economics - Answer 1

a. The basic problem of scarcity is the difference between limited resources and limitless needs (Trebilcock et al., 2013). In this example there is requirement of high technical operations but the funds are limited. There is scarcity of finances due to which the flowers are not being able to sold online and this is resulting in huge less for Holbrooks Florists.

b. For private sector enterprises, there is no fixed threshold for the minimum capital for starting a business (Gillespie, 2013). Holbrooks Florist is a family run business which started off as a teenage hobby of its founder, Mr. Holbrooks. If he had gone with the idea of starting the company in public sector he had to invest in registration, licensing, etc., which would require more funds. The second advantage of a private sector enterprise is that it is a separate legal entity and the owner is not liable to share the profit with the government.

One of the major disadvantages of the private sector companies is that in case of project failure or recurring losses, the entity might get shut down (Salvatore, 2020). Public sector enterprises are relieved from such fallouts as the government is there to secure the business by purchasing shares of the company. Second disadvantage is that in a private sector company, the additional costs like technology upgradation cost, skill enhancement cost etc. should be borne by the owner. In case of public enterprises such costs get diluted due to direct intervention of the government.

c. The rational choices that Holbrooks Florist can make to improve to business performance are

1. Opting for social media marketing for their flowers: Instagram is the best platform to market goods with beautiful pictures. Many big brands are switching to social media for marketing and Instagram is the first place they target.

2. Creating an online website: Website creation does not require high end technical expertise. Best videos are available for YouTube.

3. SEO Marketing: Research on the internet about the mostly used keywords by users while searching for online flower shops. Use those words in writing a summary of the business goal and post it in platforms like Google My Business, YouTube Channel, Instagram and Facebook.

d. Following are the advantages and the disadvantages that Holbrooks Florist would have faced if it were to operate in a centrally planned economy

Advantages

1. There is less production inequality in a centrally planned economy (Spartak, 2018). As Holbrooks Florist is a small business organization, it would have faced lesser market inequalities.

2. Prices are controlled by the government in a centrally planned economy (Gillespie, 2013). So, there is less competition and small business entities like Holbrooks Florists get the opportunity to thrive.

3. Production is given priority over profit making in a centrally planned economy (Roe, 2016). Therefore, incurring losses would not lead Holbrooks Florist to move out of business.

Disadvantages

1. Lack of competition obstructs the flow of technical innovations (Chambers and Hayashi, 2017). Holbrooks Florist could never raise their level of quality in production.

2. Excessive government control would nullify the regulating power of the producers according the demand by the customers. The efficiency level of Holbrooks Florist will reduce to minimal.

3. Holbrooks Florist cannot sell products or follow marketing techniques that appeal to the customers. The company has to follow rules set by the government.

Business Economics - Answer 2

a. Following are the downsides of a flat structure for family run businesses:

1. Due to bottom-up approach of the structure the pressure of expertise lie on the front-line businessperson, in this case Mr. Holbrooks. The ideas and expertise of Mr. Holbrooks might not be understandable to his grandsons.

2. Due to the hierarchical nature of the flat type organizational structure, exchange of business ideas becomes difficult.

3. The flat organizational structure lack monitoring strategies for the workers (Roe, 2016). It assumes that all the workers will give their best. If any worker underperforms there is no technique to measure the low level of productivity.

4. Workers in big companies that follow the flat type organizational structure suffer from lack of work-life balance (Chambers and Hayashi, 2017). In this case this problem will not occur as it is a family run business.

5. Flat type organizational structure result in unproductivity of workers and poor decision making. Since it is a family run business and there is no authority to question the workers, productivity has a chance of decreasing to a great level.

b. Since Holbrooks Florist is a small family run business, it can apply the divisional organizational structure at this juncture. In divisional organization structure, each person is made responsible for particular business activity In this case, Jack can look after the production strategies and Jamie can take control of the marketing tasks.

This organizational structure will benefit the business in the following ways.

1. Division of work will lead to specialized attention for each task

2. Burden sharing of the tasks will enhanced the efficiency of the production process.

3. Evaluation and monitoring will be possible at ground level and broader level.

c. Principal-agent problem arises when one person takes business decision on the behalf of another person (Spartak, 2018). In family-run businesses this is common. However, if this takes place too often it can lead to clashes among the family members as trends of superiority and inferiority might creep in.

Business Economics - Answer 3

a. Effects of macro and microeconomic issues on business

  • Inflation: Flower plants will become costlier at the wholesaler’s market and hence prices at retailer’s shops will also rise.
  • Low wage for shop workers: Holbrook Florists can get labour at a lower cost, so production will increase.
  • Price fluctuations in fuel and other retail products: If the business resort to online marketing, delivery of products will incur more costs.
  • Rate of higher economic growth of UK compared to last year: economic growth will increase the rate of inflation and this will induce the produce to produce more goods.

b. Demand side and supply side policies

  • Demand Side Policy: In the year 2016, the tax rate in the UK was cut to 0.5%. Tax rate cuts is an expansionary fiscal policy where citizens are encouraged to increase spending by allowing more income to remain their hands (Gillespie, 2013). Another demand policy of the UK government is reduction of the insurance paid by firms to the govt., when firms hire new workers. This demand side policy of the govt encourages production of goods, thus generating employment in the economy.
  • Supply Side Policy: Privatisation is one of the major supply side techniques followed by the UK govt. The sale of dysfunctional public enterprises to the private sector is aimed at increasing the efficiency of the business entity (Roe, 2016). Secondly, deregulation of companies by the govt is another supply side augment step. In this strategy, the govt lifts the regulations of the public enterprises on the production and marketing by business entities giving them a free run to operate.

Business Economics - Answer 4

a. The five reasons for the company to trade in the international market are:

1. The company will be open to competition among other small run businesses in the international market.

2. There can be exchange of production techniques and this will enhance the capability of production.

3. If Holbrook Florists engage in international trade it will benefit from exchange rate manipulation. This will allow the company to market goods in countries where the value of the currency is lower than UK dollar.

4. The surplus goods can be easily marketed to the foreign lands and revenues can be earned.

5. The inflow of revenue is large and scope of meeting demand is expanded in the international trade.

b. Three globalization drivers of the floral industry in the UK are:

1. Market factors: Flowers are in high demand on various ceremonies in the UK. Different types of flower bouquets are in demand during the marriage season. The fresh cut flower

market in the UK is worth a 2.2 billion pound. An average income earning spends on an average of 35 pounds per year on flowers in the UK. This factors can contribute to improve the dwindling sales of the business.

2. Cost competition: The UK floral industry has a wider presence in internal market due to wide range of flowers. This factor gives cost competition in the international market.

3. Competitive drivers: Other competitive drivers for the UK floral industry to expand in the international market are quality of flowers, colours, variety, packaging designs, aided services like perfume making, essential oils, etc.

c. Different types of tariffs that affect international trade are:

1. Specific tariff: A fixed amount of tariff is charged for specific level of the commodity marketed. This tariff does not apply evaluation of goods and hence is easier to manage.

2. Ad valorem tariff: In this case, the tariff is evaluated as a certain percentage of the commodity exported or imported. It is an equitable tax regime as the poor people pay lesser tax and richer people pay higher tax (Salvatore, 2020).

3. Compound tariff: This tariff regime implies specific tax and percentage tax on the certain amount of good marketed in the international market.

4. Sliding scale tariff: This import duty is imposed on the basis of the price of the commodity rather than its amount (Trebilcock et al., 2013). It can be either a fixed amount of tax or a percentage charged of the basis of the price of the product.

Reference List for Business Economics

Chambers, C. and Hayashi, T., 2017. GAINS FROM TRADE. International Economic Review, 58(3), pp.923-942.

Gillespie, A., 2013. Business Economics. Oxford: Oxford University Press.

Roe, J., 2016. Minding Her Own Businesss: Colonial Businesswomen in Sydney. Australian Historical Studies, 47(3), pp.495-496.

Salvatore, D., 2020. Introduction To International Economics. [S.l.]: John Wiley.

Spartak, A., 2018. The Fourth Industrial Revolution And International Trade. International Trade and Trade Policy, (2), pp.5-21.

Trebilcock, M., Howse, R. and Eliason, A., 2013. The Regulation Of International Trade. Abingdon, Oxon: Routledge.

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