Market Imperfections and Market Failure in Business Economics

This document explores the concept of market imperfections and market failure in the context of Business Economics. It discusses how these factors can affect entrepreneurship activity and labor and financial products using relevant examples. Additionally, it provides a logical interpretation of how UK government economic policies can shape business strategy. The document also highlights the importance of understanding these concepts in order to find innovative solutions to address environmental issues and promote economic growth.

Business Economics

Contents
INTRODUCTION...........................................................................................................................................3
A. Overview of the case study.....................................................................................................................3
B. Micro economics.....................................................................................................................................3
Using the case study, explain how market imperfections and market failure can affect entrepreneurship
activity?...................................................................................................................................................3
Explain how market imperfections and market failure affect labor and financial products using relevant
examples?................................................................................................................................................5
C. Macroeconomics.....................................................................................................................................6
Provide a logical interpretation of how the UK government economic policies can shape business
strategy....................................................................................................................................................6
Interpret how UK government economic policies can shape business decisions?...................................7
REFERENCES................................................................................................................................................9

INTRODUCTION
Any practice conducted to make a profit, operated by an individual and controlled with the
aid of economies is referred to as management consulting. As a result, Managerial Economics is
often referred to as Business Economics. The ideas, rules, and hypotheses of purely economic
theory are extended to every commercial activity in Managerial Economics. As a result, it is also
known as Applied Economics (Yazici, 2019).
A. Overview of the case study
It demonstrates how competitive instability in the result of market dominance, in
comparison with very well and mandatory cigarettes standard precautions including certain
pricing and promotion limits, has prevailed in cigarette factories growing higher purchasing
power and profitability. For doing so, it emphasizes the much factor of tobacco control:
substantial improvements in personal income profit cigarettes firms by freeing them to increase
taxes or somehow revenue, indicating whether government revenues remain high leading to
lower smoking rates.
B. Micro economics
Using the case study, explain how market imperfections and market failure can affect
entrepreneurship activity?
Market failure and imperfections: The inefficient sale of products or services in a
capitalist economy is referred to as market failure. Whenever the quantity of products or services
delivered does not match the amount of goods and services provided, this occurs. Monopoly
dominance is one of the possible inequalities which may influence the free enterprise. There are
three major methods to addressing this market loss and critical matters, and any organisation
concerned with combating market violations should accept one of them. The first step is to
increase consumer competitors; the second is to nationalise tobacco industry; and the third step is
to regulate to mitigate the harmful effects of market failure (Kuběnka and Myšková, 2019). This
one would be both unfavourable (as expanded cigarette industry competitiveness will have
detrimental public harmful effects) and practically impractical, considering the current hurdles to

access to the market, that, as previously said, would continue to rise as smoking cessation efforts
advance.
Many of today's environmental issues are the result of business imperfections, and
understanding these issues and indeed the resulting market failure will contribute to innovative
solutions that help fix some of the problems. Since people are unable to evaluate the cost of
products and services and/or monitor other people's private details, the economy struggles to
generate market price and effectively organize payments. Businesses trying to uncover the
underlying skill of their potential workers before hiring them are examples of financial scenarios
containing non - symmetric intelligence.
Market and factors of production: Imperial Tobacco and Japan Tobacco Global, that together
hold about 80% of the smoking and tobacco industry in the United Kingdom, are indeed the
market leaders. In the United Kingdom, smoking ended in 1974, and since then, revenues of
cigarettes have gradually diminished. Broadly speaking, imported tobacco sales plummeted by
3.5 percent in 2016. Premium cigarette sales have been declining in recent years, although
economy tobacco, roll-your-own (RYO), and tobacco products have grown in popularity.
Cigarette at low prices currently makes up more than half of the cigarettes distributed in the
United Kingdom (Audretsch, Belitski and Desai, 2019).
The three-firm coefficient value, which represents the gross customer base of each nation
paid for with the three firms with the highest market share, is the most significant indicator of the
concentrated form essence of smoking rates. Apart from Indonesia, the three leading companies
in any significant market dominate at least 80% of the business, and in many countries, the top
three trading networks upwards of 90%. To put these numbers in context, the UK Antitrust
Committee reviews consolidations between businesses that will lead in businesses winning more
than 25% market penetration or less where it appears probable that monopoly would be
significantly harmed. The major underlying obstacles to consumer penetration by new tobacco
manufactures, that has unwittingly been compounded by tobacco control policies, such as
advertisement and marketing prohibitions, intensify the increasingly fragmented presence of
cigarette economies. These interventions are important and powerful elements of tobacco
prevention strategies6, and their scale and regional reach are expected to increase.

Explain how market imperfections and market failure affect labor and financial products using
relevant examples?
Labor market and its stickiness effect on production: The job rate in the United Kingdom
was reported to be 75.1 percent, down 1.4 basis points from a year ago and 0.1 couple of percent
from the prior quarter. The jobless rate in the United Kingdom was reported to be 4.9 percent, up
0.9 points higher from a year ago but down 0.1 percentage point from the past period. In the
United Kingdom, about 5,000 workers work explicitly in the cigarette companies. Many of them
would be in high-skilled positions like academic and specialized scientist roles. Tobacco duties
tax collections in the United Kingdom totaled 9.96 billion British pounds in 2020/21, up from
9.29 billion British pounds the past fiscal season.
Financial market and its importance: Financial markets include any environment wherein
investors purchase, such as the stock exchange, credit markets, foreign currencies, and currency
swaps, to select a few. Financial markets are crucial for liberal democracies to operate
effectively. Cigarette firms are using rate cuts to mask price increases in elevated countries
where unique taxes tend to dominate. This brings up the question because, as city economists
have noted in past months, minor, steady higher taxes, even at higher levels of taxation, may
favor the industry while having minimal effects on demand (in comparison to big, irregular tax
increases). Some also say that the large multinational corporations today accept lower basic
taxes, although in a phased manner. As a consequence, increased nations like the United
Kingdom, for instance, are also among the most prosperous in the market (Baffour and et.al,
2020).
It also illustrates why, amid falling tobacco prices, company earnings are rising in most
Foreign nations. Second, the importance of individual taxation has reduced competitive forces
even further. Enhance business aim to narrow pricing differences, although excise tax taxes
enlarge them, making it more difficult for low-cost brands to compete. As a result, enhance
business appear to favor the big cigarette producers.

C. Macroeconomics
Provide a logical interpretation of how the UK government economic policies can shape business
strategy
Monetary policy: When designing the banking structure, just like with any major
legislative adjustment, a series of aspects must be discussed. Unwillingness to construct a
regulatory system will be the strongest and probably severe challenge. The concept of impact, is
from the other direction, is clearly overcome able although, like certain other relevant
stakeholders, OFSMOKE will be compensated by a taxation or authorization service provided by
all cigarette products selling in the industry, at no immediate cost to the city or customer. As a
practice, it should be very simple to market the initiative to investors, who are primarily the
constituents who will appoint the candidates who will execute it (Tsvetkova, Partridge and Betz,
2019).
Fiscal policy: Besides this, even though they attempted to lower rates, the government could
adjust by levying prices still higher to ensuring that the customer's price would not decline.
Finally, others argue that higher tax revenue would limit government efforts to enforce
aggressive tobacco prevention policies. Although this is a theoretical concern, considering the
price fairly inelastic of cigarettes, it is likely that, just as corporate revenues are rising amid
declining prices, government revenue would follow suit. Although if that's not the case (which
might necessitate additional investigations), two elements of price limit enforcement would
reduce any market distortions.
Supply side and demand side policies: Governments have placed limits on tobacco companies'
actions, but they have yet to balance tobacco industry targets with health care workers. As a
response, cigarette industries have postponed or mitigated the effects of enacted public health
regulations, and they have not helped to reduce the tobacco crisis. Numerous compliance
developments have been introduced over the last decade as ways to help balance sector behavior
towards public health priorities, but none have been implemented (Zhu, He and Luo, 2019).
To extend existing tobacco prevention policies, several experts have proposed new supply-side
interventions. Borland actually reviewed that tobacco advertisements be monitored by a
government body with a legal requirement to include cigarettes in formats that are less harmful.

Tobacco legalisation, international tobacco exchange restrictions, and fines for smoking by
minors are among the other strategies introduced. Initiatives for harm prevention focused on the
use of state authority to expand the accessibility of cigarettes in non-tobacco or non-smoked
forms are also supply-side management initiatives.
Inflation and price stability: Any policymakers are lowering or removing tobacco
subsidies in favor of assisting farmers in switching to more commercially competitive crops.
Limiting the selling of flavored cigarettes, establishing rules to limit the number of tar, caffeine,
and carbon dioxide in goods, and other measures to control tobacco products all aim to reduce
demand. Most states already have regulations in place that limit young youth exposure to
tobacco goods, including rules that make it illegal for retailers to sell to minors and measures that
explicitly target teenagers who buy, consume, or use tobacco (CAMBA, 2020).
The scheme operates by establishing an international administrative body, such as the
Office for Smoked Tobacco Regulation (OFSMOKE), which will examine what cigarette
producers are able to charge on a regular basis and impose maximum rates on each product.
Markets will be determined based on the how price levels have shifted in the market as a whole
(the wholesale price index (RPI) element), an estimate of the true costs per company faces in its
manufacturing processes, and an expectation about the efficiency gains it will be expected to
achieve (the X element).
Interpret how UK government economic policies can shape business decisions?
International business and trade: Tobacco producers are largely relying on trade and
investment negotiations to thwart tobacco-control legislation. This study looks at their attempts
to shape the Trans-Pacific Partnership (TPP), a global business and financial pact that will
potentially reach 40% of the worldwide people, with an emphasis on how these efforts could
strengthen the industry's ability to fight the advent of cigarette packets. The effects for public
health regulation of Philip Morris Organisation's involvement when using the TPP to: influence
the administrative systems and judgement mechanisms of corporate taxation at the national scale;
establish a different degree of trademarks than for the Trips agreement of Patents And
Copyrights actually provides; and broaden the preserve Because of the vast variety of countries
participating in the TPP, it poses a threat to the sustainable growth of tobacco policy (Wei, Jiao
and Growe, 2019).

Economic growth and balance of payment: Any approved improvements will be focused on
expected changes in the economy's standard prices, expected changes to the business prices, and
productivity gains the operator believes the business will achieve. For instance, when market
costs increased by 3% each year and businesses were deemed to be able to run more effectively
(i.e., by eliminating excessive investment while maintaining a same outcomes) by 1% each year,
the regulation will cause the 50 pence to rise by 2% in every one of the central planning period
started corresponding years. Besides that, as the regulator considers the next annual price check,
it will do so in the same way as before, but it will also take into account what occurred during the
previous command. For any firms were able to save as much as the expected 1% in performance,
those extra gains could be taken into consideration before determining the very next price limits
(Spencer, 2020).
Such tobacco seeds grew into a massive economic empire. By 1630, Jamestown was
exporting over a million and a half pounds of tobacco per year. The colony's culture and growth
were quickly shaped by the tobacco industry. Tobacco cultivation necessitates a lot of effort on
the part of the soil. Despite the fact that the amount of cigarettes consumed per year has
decreased, tobacco producers have made more profits. Because if provincial and national taxes
consume a significant proportion of the purchase price, the increasing wholesale cost is a
significant factor in the tobacco producers' increasing earnings. Specific firms or products
competing in the industry could be assigned separate premiums based on input and processing
costs, but provided that the majority of cost disparities represent website and product spending,
the differences are likely to be minor. Since the amount they can charge is limited, not the
revenues they can make, financial institutions also have an opportunity to manage their
businesses effectively. As a result of eliminating excessive costs, companies may increase
shareholder dividends in the near run. In comparison to the current predicament, they are unable
to raise prices in order to increase sales (Farhodovna and Abdishukurovna, 2021).

REFERENCES
Books and Journal
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