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Unit 38 Business and the Economic Environment M1
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M1 analyse the implications of government policies for a selected business
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Unit 38: Business and the Economic EnvironmentM1: analyze the implications of government policies for a selected business
Introduction
This assignment focuses on the government policies and how these policies impact
PJ Hegarty and Sons and how the business is likely to react in the case of both a
positive and negative outcome.
There are many different types of government policies and all have an effect on the
business. However, the businesses course of action can determine the results that
the business will achieve in the end.
Economic policy
These are the systems that relate to the economic state of a country and how
different matters will be handled by the government depending on the current state
of the economy. This policy has control over the economic factors such as
unemployment, gross domestic product, taxation, etc.
In the case of a positive implication for PJ Hegarty and Sons:
1. Inflation rate will be able to be controlled, which will allow the business to
have a steady price that customers can afford their products and services.
This will increase the demand as well as the supply since sales will begin to
increase.
2. The unemployment rate will decrease which will cause more people to have a
job. This is because business is increasing, so the business will need more
employees. The business will also be able to pay their employees because
they are making profit.
3. An increase in sales should allow the business to be able to cover all costs
within the business, so supply will increase.
4. Taxation will increase since the business will be making more money,
however, the business will be able to cope with this since sales will be
increasing.
In the case of a negative implication for PJ Hegarty and Sons:
1. Deflation rates will occur which means that the business will decrease prices
in order to sustain the business because customers will not be able to afford
products at high prices.
2. Customers will not be able to afford products because salaries will decrease
and more people will be unemployed because the business cannot pay them
all. This will push the business to decrease prices so that customers can afford
products and demand remains leveled.
3. The business may not be able to afford taxes, however, the government may
decrease tax rates. The business may now cut costs such as wages in order to
be able to cover other expenses to keep the business running.
4. If the business cannot accommodate, then supply will decrease which will lead
to further debt problems.
Industrial policy
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