The Association of Business Executives

Topics: Tax, Market economy, Economic system Pages: 9 (2453 words) Published: February 19, 2013
The Business Environment

Answer any FOUR questions
Q1 (a) Explore the main characteristics of a ‘fully-planned economy’. (10 marks) (b) Discuss why in practice it is more likely that a country will have a ‘mixed economy’. (15 marks)
(Total 25 marks)
Q2 (a) Discuss the reasons why an interventionist approach has been favoured by the European Union in its relations with industry. (15 marks) (b) Review the potential dangers of having large and economically-powerful trading blocs. (10 marks)

(Total 25 marks)
Q3 Explain the statement ‘as supply and demand for a product changes, so does its selling price’. (Total 25 marks)
Q4 Assess the strategies available to a business seeking to achieve competitive advantage. Answers should be supported with relevant examples. (Total 25 marks) Q5 Using examples, discuss the two main types of compulsory taxation and explore their roles within national economies. (Total 25 marks) Q6 Review the causes and potential problems that can be caused by high economic growth. (Total 25 marks)

Q7 Explain the importance of competitor analysis and explore the key issues that need to be addressed for such analysis to be effective. (Total 25 marks) Q8 In the context of the Sale of Goods, explain the following terms commonly found within a contract:

(a) Form of agreement (5 marks)
(b) Specification (5 marks)
(c) Liability (5 marks)
(d) Applicable law (5 marks)
(e) Legal action (5 marks)
(Total 25 marks)
016601 2

The Business Environment

Q1 (a) Explore the main characteristics of a fully-planned economy. There are two extremes of economic systems – one of which is the fully-planned economy. These are ones in which the State owns the means of production. And the State decides the answers to three basic questions:

• What is to be produced?
• How it is to be produced?
• For whom will it be produced?
In a fully-planned economy the basic decisions about the production and distribution of goods and services are all determined by the political machinery of the State. It is the State which has to match production and consumption. This will be easier if consumption is controlled to match what is produced. This avoids the need to find out what goods and services a community wants. While the dominant force is the State, producers also have greater power and influence than consumers. In practice, a fully-planned economy will have considerable implications for the political structure of the country within which it is practised. In particular the State will have immense problems in organising production and distribution.

(b) Discuss why in practice it is more likely that a country will have a mixed economy. The extreme opposite to a fully-planned economy is a pure market economy. But in a modern community this is virtually impossible to achieve. Most economies are in practice mixed economies, in which some decisions relating to production, distribution and consumption are made by the political machinery of the State, leaving the majority to be determined by the interaction of supply and demand. However it must be remembered that some sectors of the economy will be subject to State planning and control. The basis for recognising the practicality of a mixed economy is derived from the need for demand (derived from the wants of the consumers) and supply (derived for producers’ intentions) to interact and achieve some degree of balance.

A mixed economy offers the most practical solution since, while there are clear benefits in allowing much of the economy to be driven by supply and demand, the State is able to intervene to increase economic efficiency by correcting situations where markets do not effectively perform their co-coordinating function. They are also able to take some role in re-distributing wealth and therefore instill some element of...
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