Impact of Market Failure on Business Activity and Labour Resources in UK

BUSINESS MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK 2 CASE STUDY..................................................................................................................3
Question 1 Impact of market failure on entrepreneurship activity..............................................3
Question 2 Impact of market failures on labour and financial products......................................4
Question 3 UK government economic policies to shape business strategy.................................5
Question 4 Impact of UK government economic policies on business decisions.......................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Business management is referring to the managing coordination and other activities on a
daily basis which further result into the smooth functioning of organizations. The report is based
on the case study which will define the impact of market failure in UK on the business activity
and labour and financial resources availability. The report will also describe the UK government
economic policies over the business decision making and to shape its business strategies. The
report will also state how the application of market price cap regulations on tobacco and
cigarettes helps the government in protecting the society of UK from monopoly power
companies.
MAIN BODY
TASK 2 CASE STUDY
Question 1 Impact of market failure on entrepreneurship activity
Market failure is a situation in which the distribution of goods and services is inefficient in
the free market. Basically, this a stage where the supply of goods and services is unequal to the
demand of same goods and services known as disequilibrium. From this case study it is
identified that the market failure in UK arises because of the information failure or asymmetry,
externalities of use of tobacco, provisions of public goods and market power. The case study
states the causes of this market failure and their impact over the business which includes:
 Inequality: The inequality is one of the main reasons behind the market failure in UK and
its impact over the business is that there is a reduction in the productive potential of the
workforce. Because of the consumption of more tobacco there is a rise in health ill and
spending money on heath and treatment. Because of inequality and health spending
education performance of the poor get reduces (Thomä and Chenet, 2017).
 Externalities: It is a cost or benefits which is occur because of the transaction that affect
the third party which is not associated with the cost or benefits. The externalities may be
positive and negative. For example, because of the consumption of cigarette the people
that are consuming it get its harmful effect but it also affects the people around the person
that are consuming it. The impact of this over the business activity is that their production
will lead to the pollution increment in country.