LSME505 Business Economics Assignment: Market Analysis Report

This report delves into the realm of business economics, examining the influence of market imperfections and failures on entrepreneurial activities, particularly within the tobacco market. It explores the impact of these imperfections on labor and financial products, highlighting issues like infor...Read More

Business
Management

INTRODUCTION
Business Economics refers to a field in which the use of economic theories, models etc. is
made to understand the way in which Economics can be used for the Businesses quite effectively
and efficiently (Asian Chaves and et.al., 2020). Therefore, it is quite important that the
Businesses are able to make sure that they develop an understanding in a proper manner and can
attain the wide variety of Business goals and objectives in a right way. In this report, a detailed
discussion will be made on explanation of impact of market imperfections and market failure,
explanation of impact on labor and financial products due to market imperfections, logical
interpretation of the UK government economic policies. Additionally, a specific analysis on
interpretation of UK government economic policies will be made as a part of this assignment.
MAIN BODY
Impact of Market Imperfections and Market failure on Entrepreneurship activity-
Market Imperfections and Market failure create a particular level of impact on
Entrepreneurship activity (Baker, Kumar and Pandey, 2021). It is thus quite important to
understand the wide range of impact which can be created by it on the Business Operations.
According to a mainstream economic theory, there are four main causes of market
failure- Information failure, Externalities, Provision of public goods and Market Power.
Therefore, it is quite important to understand the high-level impact which is created by it on the
Business Activities. In the Tobacco Market, Information failure and Externalities exist.
There are stringent entry regulations in the Tobacco market. These stringent regulations
are due to the Government policies in which the sale of Tobacco is controlled through the use of
a wide range of methods and techniques and this is quite helpful in ensuring that the Government
is able to keep a tight regulation on the Tobacco Market. Also, the product is highly addictive in
nature which makes the people addicted to it. Further, the product has no real alternatives also.
The market is thus dominated by a few companies and there is lack of competition in the
Tobacco market.
The companies operating in the Tobacco Market are required to pay higher-amount of
taxes to the Government. The Government increases these taxes so that the people who are
addicted to the consumption of Tobacco are required to pay higher amount of money to purchase
Tobacco in the market which leads to an increase in the overall level of revenue of the
Government. Thus, it can be said that the market has different types of characteristics (Fairlie,
2020).
The firms which are operating within the market under such a scenario are impacted by
Market Imperfections and Market failure. This is so because these organizations are affected by

the various types of forces which exist within the market. Also in such a situation disequilibrium
can be created within the market where the quantity supplied of the goods is not equal to the
quantity demanded of the goods. Therefore, in the case of Tobacco market it can be said that the
Businesses are affected due to such a condition and thus this impacts the way they carry out their
operations within the market.
Thus, it becomes quite important that the Government of a country is able to take the right
decisions which will be very useful in ensuring that the impact which has been created due to the
influence of such a situation can be managed in a proper manner. This will ensure that the market
situation remains good and the organizations are able to earn higher-level of profits in a proper
manner.
Impact of Market Imperfections and Market failure on Labor and Financial Products-
Market Imperfections and Market failure also create an impact on the Labor and
Financial Products in the market (Konny, 2020).
It will be quite tough for the labor to get the desired amount of money which they want to
earn because in such a situation the market is in a state of disequilibrium and therefore this
creates a higher-level of impact on it. Thus in this way this affects them a lot. In the tobacco
market, such a situation will definitely affect the amount of money which a labor can get.
There are different reasons due to which labor market failure can occur. Some of these
main reasons are- Existence of skill gaps, Poaching, Labor Immobility and Inequality. Therefore,
it can be said that due to the existence of such type of reasons the overall situation of the labor in
the market is highly affected.
Financial market failure refers to a particular situation where the financial markets are not
able to operate in a right manner leading towards lost economic output and reductions in the
value of national wealth. Therefore, this is a situation where the investors are not able to get a
right amount of return on their investment and therefore the overall structure of the financial
market is affected as a result (Păunescu and Argatu, 2020).
There are different types of financial market failures. These are Asymmetries and
information failure, Moral hazard, Excessive speculation, Fall-out from externalities and Lack of
competition and moral rigging. Thus, it can be said that Market Imperfection and Market failure
can create an impact on the Tobacco Market also.
Thus, it is highly essential that the Government is able to take certain steps so that it is
able to control and regulate the financial market failure and this will be quite helpful for it to
make sure that it can manage out the needs and requirements of such a market which will help it
in running smoothly and managing and conducting its operations in a proper way quite
effectively and efficiently.

For this purpose, it is required that the Government can take appropriate steps by
analyzing the situation which is existing in such a market which will be quite helpful for it to
take the right decisions quite effectively and efficiently in a proper manner. Thus, in this way this
will also help the Government because it will be able to ensure that it can make the market better
once again which will definitely create an advantage for the investors.
Logical interpretation of impact of UK government economic policies on Business Strategy-
There are different types of UK government economic policies which can create a
particular level of impact on the Business Strategies of different types of organizations.
Therefore, it is quite important that the right decisions can be taken by the government of a
particular country so that it is able to make sure that the attainment of the future goals and
objectives can be carried out in an appropriate manner quite effectively and efficiently (Piñeiro-
Chousa and et.al., 2020).
Therefore, it becomes quite important the UK government is able to make sure that that it
is able to take the right decisions related with the Business Strategy in a proper manner. Some of
the decisions which can be taken by UK Government with regards to economic policies in
relation with Tobacco Market are as follows-
 Price Cap Regulation- It is quite important that the UK Government is able to make
sure that the Price Cap Regulation can be used in a proper manner quite effectively and
efficiently so that the right prices are set in the market (Purwanto and et.al., 2020). It will
be quite helpful to make sure that the organizations are not able to set their monopoly in
the market and are not able to set higher prices for the products and charge them from the
customers in the market. This type of model is essential to set a particular level of limit
until which the price can be increased so that the management of the prices can be done
quite appropriately by the organizations so that they are able to attain the goals and
objectives quite effectively and efficiently.
 Practicalities and Potential Policy Challenges-It is very crucial that the UK
Government is able to consider the various types of practicalities and potential policy
challenges so that the appropriate actions are taken by it which can help it a lot (Ronda-
Pupo, 2020). Therefore, it is quite important that the UK government is also able to
consider the situation which is present in the market and thus this will definitely create an
impact on it. This will help the UK Government to be able to make sure that it can take
the appropriate decisions quite effectively and efficiently and is able to set a right price
which will be helpful in the attainment of the goals and objectives in a right manner.
Interpretation of UK Government Economic Policies in shaping Business Decisions-
UK Government Economic Policies can create a particular level of impact on the
different type of Businesses. It is therefore quite important that the right Business Decisions can
be taken effectively and efficiently so that the attainment of the future goals and objectives can

be done in a proper manner. The interpretation of such policies can be done quite effectively and
efficiently in this way-
 Rules and regulations- The UK Government is considering changing the various types
of rules and regulations related to the Tobacco Market (Sanasi and et.al., 2020).
Therefore, in this way it can be said that the appropriate rules and regulations are set
which can be quite helpful in ensuring that the management of the Tobacco Market is
carried out in a right manner quite effectively and efficiently.
 Low price strategy- The UK Government’s Economic Policies are promoting the
organizations to make sure that they make the use of Low price strategy in the market.
With the use of such a strategy, it can be said that the different types of low prices can be
set in the Tobacco Market which will help a lot in ensuring that the attainment of the
future goals and objectives can be done appropriately.
 Price Controls- It is an important economic policy which will be used by the UK
government (Zolkover and Terziev, 2020). This will be required so that the UK
government is able to make sure that it is able to set appropriate prices quite effectively
and efficiently in the right manner. Therefore, in this way it will be able to make sure that
through setting the right prices a tighter control on the Tobacco Market can be maintained
which will help a lot in ensuring that the regulation of the market can be carried out in a
better manner.
 Increase in taxes- This is also an important policy measure which the UK government is
required to take. It is quite important to understand that with an increase in the taxes the
UK government will be able to tightly regulate the different types of needs and
requirements of the market quite effectively and efficiently. In this way, better decisions
can be taken in the right manner by the UK government which will help it a lot in
ensuring that it is able to manage out the particular needs and requirements in a proper
manner.
Therefore, it is quite important that the UK government is able to take all the required
actions which will be quite helpful for it in ensuring that it is able to maintain all the
different types of needs and requirements in an appropriate manner. Therefore, if it is
required to bring the policy changes also then they must be brought and their
implementation should be done in a proper way. Thus, it is quite important for the UK
government that it understands the different types of economic parameters and thus this
can be very much helpful for it in taking all the required decisions effectively and
efficiently.

CONCLUSION
From the above report, it can be concluded that Business Economic refers to the use of
different types of theories and models which are essential for the purpose of ensuring that the
different types of economic goals and objectives can be attained. It is quite important to develop
its understanding because it can lead towards taking of better decisions in a right way. This will
be very much useful in ensuring that the management of the economic needs and requirements
can be done in a better way quite effectively and efficiently.

REFERENCES
Books and Journals: