TABLE OF CONTENTS INTRODUCTION...........................................................................................................................1 MAIN BODY...................................................................................................................................1 1. Different types of goods and price elasticity of demands.......................................................1 Determine to consume the goods in the basis of price elasticity and types of goods.................3 2. Types of production and growth strategies.............................................................................3 Growth and expansion of gold mining firm................................................................................4 3. Theory of fiscal policy............................................................................................................4 Fiscal policy implemented by UK government in 2018.............................................................5 4. Benefits of globalization and international trade....................................................................5 Benefits of globalization and international trade to UK.............................................................7 A. Ratio analysis........................................................................................................................7 B. NPV calculation.....................................................................................................................8 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Financial and economic literacy help the manager to get the information about the various fiscal policy, impact of globalization and the international trade. The report highlights the different kinds of goods and elasticity of demand. It explains the various strategies to promote and expand the business in the market. It also explains the fiscal policy and the different benefits of international trade and globalization on the UK economy and business. MAIN BODY 1. Different types of goods and price elasticity of demands Different types of goods Normal goods :The quantity demand of the product is increase by increasing the income of the consumer or decrease by decreasing in the income of consumer. That kind of goods are known as normal goods. Giffen goods :Giffen goods are also known as inferior goods. Normally people buy the goods when the price of the goods is rises. It violates the law of demands of goods. In giffen goods case the close substitute of goods are not available which affect the income effect (Etzioni and Lawrence, 2016). The high level income consumer buy more goods in the market even the price of the goods is high. Substitute goods :Substitute goods are those goods which can be used in the place of other goods. For example tea is the close substitute of coffee because Tea can be use the place of coffee. The demand of the one substitute is increase than the price of the other substitute is decrease. These goods provide choice to the consumer and different alternatives by creating competition in the market. Complementary goods :Complementary goods are those goods which are consumed with the another goods. For example ink is the complementary good of pen. The price of one complementary good is increase with increase in the price of the complementary goods (Jaqua and Schaffa, 2016). 1
Some other kind of goods are consumer and non consumer, durable and non durable, consumer and producer good etc. there are different criteria to differentiate the goods in the market. Price elasticity of demand Elasticity of demand refers to change in demand due to change in the price of the product. Demand can be elastic or inelastic in nature. When the change in demand is greater due to the little change in price is known as elastic demand and when the change in less in respect to higher change in price is known as inelastic demand (Khakee and Hull, 2016). The various kinds of elasticity of demand are : Perfectly elastic demand :In perfectly elastic demand, the rise in price fall the demand to zero and a little change in price of the goods reflect a major change in demand of the goods. It helps to find the slope and shape of the demand curve which help to analyse the trend in market. Perfectly inelastic demand :The change in the price of the product does not affect the demand of the product are known as perfectly inelastic demand. The demand of the product always remains constant in any value of price of the product. For example common salt because the common salt is an essential good so the demand of the product does not change with change in price. Relatively elastic demand :The proportionate change in demand is grater than the proportionate change in price is known as relatively elastic demand. For example the price of the goods is increased by 25 % and the demand of the goods is decreased by 30% then the demand of the product is relatively elastic. Relatively inelastic demand :the percentage change in demand is lesser than the percentage change in price are known as relatively inelastic demand. For example the price of the product is increased by 40% and the demand of the product is decreased by 20% is known as relatively inelastic demand (Haynes and Grensing, 2018). Unitary elastic demand :The percentage change in demand is same as the percentage change in price is known as unitary elastic demand. The degree of elasticity of demand is 1 in Unitary elastic demand. 2
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Determine to consume the goods in the basis of price elasticity and types of goods The price elasticity and types of goods help the customer to determine the decision to buy product and services or not. When the demand of the product is perfectly elastic the small change in price of t eh product reflect the grater change in demand of the customer. If the price of the substitute goods is increase than the customer change their buying decision and move towards the other substitute goods. Inelastic demand does not change the decisions of customer in case of inferior goods like common salt. The rise or fall in the price of salt does not change the price of the products so the decision of customer remains same. 2. Types of production and growth strategies Types of production Primary production :It refers to extracting and producing the goods from the nature. For example agriculture, mining, fishing, forestry are the example of primary production. The production of the goods or product are related to the earth and Ocean. Secondary production :The conversion of raw material into the finished goods are included in the secondary production. Generally manufacturing and constructing industry are comes under the secondary production. The example of secondary production are clothing and chemicals, cars, furnishing etc. Tertiary production :Tertiary production includes the service industry. The example of tertiary production are education, transport, health and defence, administration, banking, government service etc. It includes to provide the goods in the hand of the consumer (López-Cózar-Navarro, Benito-Hernández and Platero-Jaime, 2017). The different factor such as land, labour, capital and enterprise are dome common factor which affect the production activities. Various growth strategies Market penetration :It was used by the small businesses to market and promote the existing business within the same market to increase the market share of products. To increase the market share the company decreases the price of the product which attract the customer towards the same product and help the company to get the higher customer in compare to their competitors. 3
Market expansion strategy :It is also known as market development strategy. It refers to selling the existing product of the company in the new market to capture a new range of customer and expand the business with new market (Richter and et.al., 2018). Company use the market expansion strategy when the competition in the existing market is high and there is minimum chance of growth. Product expansion strategy :In product expansion strategy organization wants to expand the business with increasing the product range or adding new features in the existing products. It helps to introduce the new product in existing market and provide range of new products to the existing loyal; customer (Types of growth strategies,2019). Diversification strategy :It refers to sell the new products and services in the new market. Diversification strategy is riskier strategy because it need huge capital investment and market research to expand the business. To diversified the business a company needs a perfect market research to evaluate the existing market, competitors, growth option etc. Acquisition strategy :In this strategy a company purchase the business of another company to expand the business and capture greater market share. Acquisition strategy help the company to expand the business and enter into new market so the company can get the variety of customer with new demands of products. It is less risky than diversification strategy because the market and product are already establish (Young-Speirs and et.al., 2018). Growth and expansion of gold mining firm Gold mining firm use the product expansion strategy for the expansion and growth of the business. They provide the variety of new product in the existing market to capture the grater market share. In product expansion strategy they add the new features in the existing products or introduce the new product in the existing market. It encourages the gold mining firm to introduce new range of products to attract the customer. 3. Theory of fiscal policy Fiscal policy :it refers to the different strategies and policies by which the government adjusts the spending level and tax rates to regulate, monitor and influence the economy. It was used by thecentralbanktoregulatethesupplyofthemoneyacrossthenation(Bhattaraiand Trzeciakiewicz, 2017). Fiscal and monetary policy are used to regulate the money and achieve the goal of the organization. By using the fiscal and monetary policy government can control the 4
economic factors and forces. To manage the spending power and tax rate various regulation are formed by the government (Oliver, 2019). Fiscal policy implemented by UK government in 2018 In 2017 the UK fiscal deficit was£46 billion or 2.3 % of GDP. The net debt in public sector was 87% of GDP and government debt was £1.8 trillion. In 2018 UK government develop various policies to improve the fiscal deficit and maintain the tax rate in the nation. The tax rate was low which results to less collection of fund to manage the expenses of the UK economy. UK estimates the spendings of the nation to control them. The expected spending of the government is £814 billion and £150 billion in healthcare, £165 billions in pension, £85 billion in education and £47 billion in defence. It implements various plan to control the deficit. The aim of the fiscal policy is to cut the structural fiscal deficit is to below 2% of the GDP. They want to cut the structural fiscal deficit by 2 % in 2020-21. UK government implement the balanced budget to manage the tax rate and the spending power. The unemployment rate of the UK was 4% in 2018 which was quite low to the other country which shows that the population of UK was able to get the employment. It reflects that the budget of the UK should be balanced or in surplus. But due to the structural gap between the government spending and the tax rate UK faces the budget deficit in 2018. In budget deficit the spending of the government is exceeded to its expected budget. The Brexit also the reason of increasing the deficit. 4. Benefits of globalization and international trade Globalization :Combination of one nation economy to the other nation economy is known as globalization. Different companies come together on the global platform to established and expand their business in global market (Das and Tamuli, 2017). It makes the international trade easy because it provides the variety of investors with the different range of customer. Benefits of globalization Globalisation provides the huge market place to expand the business of the company. It helps to gain the benefits from the global market. It provides the different technological tools and knowledge to promote the business in different countries. It also provides the employment opportunity and decrease the rate of poverty in the nation. 5
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Globalization provides variety of product to different customer and help the company to improve their product range and category. Globalization promotes the different culture, value, traditions and languages across the world. It helps the company to gain new knowledge and skills to develop new strategies and plan in the organisation. Due to the globalization the information regarding the business activities, product and servicesflow faster. It also increasesthe transport and trade within the different countries. It provides the ample opportunity to expand the business and diversify it to various area. It improves the quality of goods and services and provide them via different methods like online way or at different stores. Globalization increases the competition in market which force the companies to reduce the prices of the goods and services and provide the product on lower rate to the customer. International trade :It refers to selling goods and service across the nation and provide them to different customer of different countries. It helps the different countries to get the product which can't be produced in the country due to the insufficient resources or climate. It helps to get the best product. Benefits of international trade It helps to increase the revenue of the company by addressing the different clients and customer across the country. In international trade one country provides its best product to the other country which reduces the competition in the market and also help the customer to get the product in best price. It increases the employment level and efficiency of the production. The organization uses the best method of production to reduce the cost in the market and remain competitive in the market which ultimately improve the efficiency of the production. 6
Benefits of globalization and international trade to UK GlobalisationandinternationaltradeprovidevariousbenefitstotheUKeconomyand businesses. It provides the cheap labour to the company which reduces their production cost and help them to gain the higher market share. Globalization help them to promote the product across the world and get the better price of their product. It increases the competition in market which increases the quality of the product and services. Globalization helps the companies to get the investment from the investor and develop their business in different countries. International trade help the UK business to acquire the variety of resources from the different countries and get the best output. It helps the company to improve the efficiency of the production by providing the best quality raw material. It reduces the competition in the product or businesses in which UK is best. A. Ratio analysis 1. Current ratio : current assets / current liabilities RON ltdMES ltd current assets13601020 current liabilities-760-1040 current ratio-1.7894736842-0.9807692308 2. Gross profit margin ratio : Gross profit / net sales RON ltdMES ltd Gross profit720364 sales21501512 GP margin ratio0.33488372090.2407407407 3. Operating profit margin ratio : operating profit / sales RON ltdMES ltd operating profit470174 sales21501512 OP margin ratio0.21860465120.1150793651 7
4. Debtor turnover ratio in days = Average debtor / net sales * 360 RON ltdMES ltd debtor900680 net sales21501512 Debtor turnover ratio (in days)150.6976744186161.9047619048 5. Creditor turnover ratio in days = Average Creditor / net sales * 360 RON ltdMES ltd creditor-360-400 net sales21501512 creditor turnover ratio (in days)-60.2790697674-95.2380952381 B. NPV calculation Israel project YearCash inflowsPV factor @ 2%Discounted cash inflows 115000000.9801470588.23529412 215000000.9611441753 315000000.9421413484 415000000.9241385768 515000000.9061358596 Total discounted cash inflow7070189 Initial investment1800000000 8
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NPV (Total discounted cash inflows - initial investment)-1792929811 South Korea project YearCash inflowsPV factor @ 2%Discounted cash inflows 15000000.980490196.078431373 211000000.9611057286 32500000.942235581 412200000.9241127091 514000000.9061268023 Total discounted cash inflow4178177 Initial investment1800000000 NPV (Total discounted cash inflows - initial investment)-1795821823 Interpretation :From the above calculation it can be concluded that both the project of South Korea and Israel gives the negative NPV. So they did not have to select any project because both projected resulted to loss in the company. CONCLUSION The report summarised the different elasticity of demand and determine the decision of purchase the products via the price elasticity. It can be concluded that globalisation and 9
international trade help the company to gain the market share, cheap labour, scare resources and huge customer in the market. The fiscal policies help the economy to maintain and control the money and tax rate in the nation. 10
REFERENCES Books and Journals Bhattarai, K. and Trzeciakiewicz, D., 2017. Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis.Economic Modelling,61.pp.321-338. Das, A.K. and Tamuli, J., 2017. Emerging factor markets in Indian agriculture: Water and rental of capital goods. InIndian Agriculture after the Green Revolution(pp. 46-62). Routledge. Etzioni, A. and Lawrence, P.R., 2016.Socio-economics: Toward a New Synthesis: Toward a New Synthesis. Routledge. Haynes, M. and Grensing, G., 2018. Battle Lake Business Retention and Expansion Strategies Program. Jaqua, D. and Schaffa, D., 2016. How to Catch Capone: The Optimal Punishment of Interrelated Crimes.Available at SSRN 2831590. Khakee, A. and Hull, A., 2016. An Ex-Ante Evaluation of an Urban Project through Property Value Increases: An Hedonic Price Approach. InNew Principles in Planning Evaluation(pp. 121-158). Routledge. López-Cózar-Navarro, C., Benito-Hernández, S. and Platero-Jaime, M., 2017. The influence of cooperativerelationsongeographicalexpansionanddiversificationstrategiesinfamily firms.International Business Review,26(4). pp.764-773. Oliver, M.J., 2019.Whatever Happened to Monetarism?: Economic Policy Making and Social Learning in the United Kingdom Since 1979. Routledge. Richter, G. and et.al., 2018, April. Stress-based statistical modeling of induced seismicity at various production types. InEGU General Assembly Conference Abstracts(Vol. 20, p. 12487). Young-Speirs, M. and et.al., 2018. Host defense cathelicidins in cattle: types, production, bioactive functions and potential therapeutic and diagnostic applications.International journal of antimicrobial agents,51(6). pp.813-821. Online Typesofgrowthstrategies.2019.[Online].Availablethrough: <https://www.1819.brussels/en/growing-your-business/growth-strategies/types-growth- strategies> 11