Market Failures and Imperfections in Entrepreneurship Activity

This article discusses the market failures and imperfections that affect entrepreneurship activity, with a focus on labor and financial products. It also explores how UK government economic policies can shape business strategies and decisions. The case study of Sierra Leone's health service system is used as an example. The article highlights the importance of addressing market failures and implementing effective economic policies for the development of businesses.

CO042017846DBM
Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
Main Body.......................................................................................................................................3
Several market failures and imperfections which affects Entrepreneurship Activity.................3
Using relevant Examples, explain effect of market failure and imperfection on labour and
financial products........................................................................................................................4
How UK government economic policies can shape business strategies.....................................6
How UK government economic policies shape Business Decisions..........................................7
REFERENCES................................................................................................................................9
Books and Journals:....................................................................................................................9

INTRODUCTION
Sierra Leone is a small nation which has just around seven million people all over there
according to the statics(Hanson, 2020). A department is provided a responsibility to deliver
health care services to the residents of the country which is a government department Ministry of
health and sanitation. Health service system is managed by this department in Sierra Leone. HSS
is considered as a part of public good as every resident has a right to get health care services.
There are market failures and Imperfections which are faced by economy of Sierra Leone which
affects activities of entrepreneurs. They work for a vision which states to deliver well functioned
health system for efficient and high-quality health care which results in socio-economic
development of the country. The services should be of high quality with ease of accessibility,
affordable and equal for all residents of Sierra Leone.
Main Body
Several market failures and imperfections which affects Entrepreneurship Activity
Market Failure refers to a situation where there is an inefficient distribution of Goods and
services in the market. On the other Hand, market imperfection refers to a situation where there
is a competition for share in market due to high barriers on entry and exits, distinguish product
and services and small number of buyers and suppliers. No market can be perfect in practical or
real world. Entrepreneurship activities covers all the activities which are needed to carry out any
business. The major activity which is performed by Entrepreneurs in an organisation is decision
making. The market failures and imperfections affect business in that market directly which
affects activities of entrepreneurs in a business (Hechavarría and Brieger, 2020). According to
the given case study, Market generally fail because of mismanagement in priced system and
other imperfections such as natural monopoly, public goods and many more. The types of market
failures which affect activities of entrepreneurs are elaborated below:
Public Goods: In terms of economics, public goods are goods or services which are
available to all members of a society and consumption by one person does not decrease quantity
available to other person. In case of Health service system which is provided in the case study,
health care services are considered in public goods as they should be available to all members of
society irrespective of any discrimination (Seo and Kim, 2020). These services should be
provided in minimal cost so that members of society can afford them. A situation of market

failure occurs in case of public goods when demand for such goods is not provided by public
sector to society. These services are financed through strategic plans of government and health
care is provided free to society irrespective of their capability to pay.
Natural Monopoly: Natural monopoly refers to the monopoly of using resources which
are connected to natural environment. In this context market failure can be a situation of over
utilisation of natural resources by humans which causes extinction of ecosystem services and
biodiversity (Hernández-Sánchez, Cardella and Sánchez-García, 2020). In Health system
services, entrepreneurs should focus on reducing waste of natural resources like water to make it
available to society. According to given case study, this can also cease in the overburden of
region waste on the surface of earth and deplete of much required merchandise applicable for
sustainable living by organisms, including human beings.
Externalities: Externalities refers to a situation where cost or benefits is caused to
producers which is not financially incurred or received by them. Market Failure also affect
Externalities as resources are said to be insufficiently allocated which results in wasteful
consumption and production output. In the given case study, it is thought that the manufacturer
of costs are neither incurring the social costs nor in receipt of social benefits.
Using relevant Examples, explain effect of market failure and imperfection on labour and
financial products
Market failure and imperfection has a very bad impact on financial products as well as
labour. Market failures led to non-availability of essential resources to public no matter what is
the reason. Taking an example of current situation faced by whole world of COVID19 in which
there is a spread of a deadly virus and no vaccine was available to cure that. In that case health
service system is under high pressure of providing essential health care to the patients of
COVID19 (Salim, Susilastuti and Rafiqah, 2020). Due to this, lock down is announced in various
parts of the world which affects the financial products of every economy which leads to decline
in economy of Sierra Leone. It also puts high pressure on the labours of health care sector as
there were high number of patients and they are increasing rapidly all over the country. Workers
of health care sector are always in touch of the infected patients which scares them to work in
that sector. Not in the health care sector but in every sector of business the financial products and
labours are affected due to the pandemic.

Not only the virus puts impact on health of residents, but depression caused in them due
to terror of virus as well as packed at one place. This also led to several health issues to them.
The lock down in various countries affects operations of nearly every business and creates
unemployment in the country. It lowers down the value of financial products of a country due to
low demand of several products (Jones and Tonetti, 2020). Taking an example of Crude oil,
during lock down demand of crude oil decreases gradually which results in decrease in prices of
financial products and bought economic crises in the country. Health service system provides
health services to the patients and provides them drugs for the same which includes high cost and
taken from government funds. In the scenario of COVID 19, where the requirement of health
care services increases very drastically. It rises the prices of health care services and drugs in
Sierra Leone which led to failure of market in various terms and directions. Non availability of
beds and overtime done by labour in the organisation of health care services affects their
financial products.
According to the case study, market failure causes non availability of resources to
employees and in these situation labours of businesses affects in several ways (Rutkauskas and
Stasytytė, 2020). Market failures led to downfall in economy which creates unemployment.
Unemployment is a situation where they are no jobs for candidates who are willing and need job.
In case of market failure, the condition of labours in various businesses decline. In that time of
pandemic there was lots of unemployment in various businesses which led to huge welfare loss
to the society.
Market Failure and imperfection situation is so common in developing nations that needs
to be simplify in order to make them developed and Sierra Leone is a typical example for the
same. According to case study, Market failures lead to fluctuation in business cycles which
results in upswings and downswings in activities of products. In order to handle this situation
government intervention became essential on continuous basis to mitigate increase of its
occurrence. In Health service system it is essential to be intervened by government to fulfil the
vision of the Ministry of Health and Sanitation (Keles and Aydin Goktepe, 2020). The labour
market refers to the availability of skilled labour in the market. Due to the lock down in the
Sierra Leone, there is low availability of labours in the health care services and also people are
scared of this deadly virus due to which they do not want to go in the health care services and
non availability of labour in the sector led to market failure in Sierra Leone

How UK government economic policies can shape business strategies
In order to shape strategies in a business the policies formulated by government plays an
important role. When government formulates economic policies, it affects various business in
market and lead to change in business strategies. Government of Sierra Leone and development
partners both focuses on a need to increase allocation of budget in the plan. In order to achieve
this objective government name, it as Abuja plan which needs to spend 15 to 20 percent of gross
domestic product of country on health service systems (Olcina, Tur and Escriche, 2020). Due to
the pandemic HSS needs to improve its strategic planning as it became essential to provide
health care services to every individual on regular basis with complete safety.
Allocation of more funds in the organisation providing health care services helps the
business organisation to provide more facilities during tough times with improved infrastructure.
These economic policies of government help businesses in health services to provide services
with low cost to the residents. Considering health services as public goods puts an emphasis to
provide these services to each person possible (Keles and Aydin Goktepe, 2020). They also
include making available drugs at cheap rates in the market so that it can be affordable to every
resident of Sierra Leone. When UK government formulates economic policies, they help
organisation to formulate their business strategies in a manner to provide better health care
services to their customers in low cost. The budget for health services is prepared by ministry of
health and sanitation who is responsible for health service system in the country. As the
department knows each aspect with the shortcomings of health services provided in the country it
became easy for government to formulate those economic policies for benefits of the general
public.
Government economic policy refers to the measures which are taken by the government
to influence the economy. There are two types of economic policies which can be taken in this
economic policies are monetary and fiscal policies. Fiscal policy is the policy which helps the
government to estimate taxation and spending of government and are further divided in three
types neutral, expansionary as well as contraction policy. Whereas the monetary policies refers
to those policies which define the actions of central bank of nation are are further divided in two
types expansionary as well as contraction policy. All these policies also affect the working of
health care system of Sierra Leone in several ways.

Government provides for various provisions about basic infrastructure of organisations
operating in health care sector (Mulyana and Adidarma, 2020). As pandemic knocks the door of
whole world it became essential to increase beds in organisations of different locations to protect
others from infection of that deadly virus. Ministry of health and sanitation provides numerous
numbers of beds in the hospitals which increase infrastructure in organisation. With the funds
send by government to the organisation they should need to make strategic planning taking in
mind the main vision of health service system. Various ICU units are needed to be transferred
from one location to another location to handle that situation of pandemic needs a proper
strategic planning to be implemented during high crises. The spread of this virus increases the
death rate of a country which puts a negative impact on economy of a country. The policies
which are given from demand side affects the demand and it increases very gradually in the
health care due to COVID 19 and supplier gets unable to fulfil those demands which increase
price of products in this sector. It affects the economy of a country and increase inflation rate. It
requires stability in price of various services of health care sector and drugs.
How UK government economic policies shape Business Decisions
Economic policies formulate by UK government helps various business to give them a
new turn. Rebates in various fields provided by government to different business give them
opportunity to focus on profitability of business. The situation of market failure and imperfection
lowers market situations. The market gets down gradually which affects the rate of products and
results in losses to various businesses. After considering all these factors government formulates
economic policies in order to save economy of the country. They provide foved to look at these
areas
r rebates in various taxes which helps organisation to take business decisions regarding
development of businesses. In order to improve economic condition of country, government of
UK lessens regulations imposed on businesses (Mladenović and Krajina, 2020). Lower
regulations open gates for new entrant to enter market which helps in generation of employment
and helps to improve economic condition of a country. It creates competition in the market
which shapes the decision making of existing business organisations. They provide business
organisation to take decisions in direction of growth opportunities generated in the market. As
lock down creates unemployment in the country, so many jobs are opened after locking down
and liberalisation in economic policies helps businesses to create more opportunities in market.

To develop any business decisions taken by management for betterment of business defines the
success of respected business. The monetary policies of federal government provide motivation
to businesses to take major decisions for growth of their organisation (Mochkabadi and
Volkmann, 2020). Decisions according to the decisions of government ensures uninterrupted
services of an organisation which depicts durability of business with more smooth functioning.

REFERENCES
Books and Journals:
Hanson, G.H., 2020. The impacts of the US–China trade war. Business Economics, 55(2), pp.69-
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Hechavarría, D.M. and Brieger, S.A., 2020. Practice rather than preach: cultural practices and
female social entrepreneurship. Small Business Economics, pp.1-21.
Hernández-Sánchez, B.R., Cardella, G.M. and Sánchez-García, J.C., 2020. Psychological Factors
that Lessen the Impact of COVID-19 on the Self-Employment Intention of Business
Administration and Economics’ Students from Latin America. International Journal of
Environmental Research and Public Health, 17(15), p.5293.
Jones, C.I. and Tonetti, C., 2020. Nonrivalry and the Economics of Data. American Economic
Review, 110(9), pp.2819-58.
Keles, D. and Aydin Goktepe, E., 2020. The Effect of Emotional Labor Behaviors of Employees
on Burnout Syndrome and Intention to Quit: A Research in the Ready-made Clothing
Sector. Business and Economics Research Journal, 11(3), pp.855-873.
Mladenović, D. and Krajina, A., 2020. Knowledge sharing on social media: state of the art in
2018. Journal of Business Economics and Management, 21(1), pp.44-63.
Mochkabadi, K. and Volkmann, C.K., 2020. Equity crowdfunding: a systematic review of the
literature. Small Business Economics, 54(1), pp.75-118.
Mulyana, B. and Adidarma, B., 2020. Determinants Of Profitability And Its Implications On
Corporate Values (Studies At Ceramic, Porcelain And Glass Sub Sector Listed In
Indonesia Stock Exchange, 2009-2018). International Journal of Business, Economics
and Management, 7(1), pp.211-221.
Olcina, G., Tur, E.M. and Escriche, L., 2020. Cultural transmission and persistence of
entrepreneurship. Small Business Economics, 54(1), pp.155-172.
Rutkauskas, A.V. and Stasytytė, V., 2020. Stochastic informative expert system for
investment. Journal of Business Economics and Management, 21(1), pp.136-156.
Salim, M.N., Susilastuti, D. and Rafiqah, I.W., 2020. Determinant of MSMEs performance and
its impact on province GRDP in Indonesia. International Journal of Business,
Economics and Management, 7(1), pp.1-13.
Seo, H.S. and Kim, Y., 2020. Intangible assets investment and firms’ performance: Evidence
from small and medium-sized enterprises in Korea. Journal of Business Economics and
Management, 21(2), pp.421-445.