csec principles of business

7/25/2019 CSEC PRINCIPLES OF BUSINESS

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1) The first question is a compulsory 10 marks question, taken from May June 2002 past

paper (General). Question

1. It involves Economic Systems and Government Control of Business Activity.

(a) List TW ty!es of economic systems. (2mks)

(") E#!lain t$e differences "et%een t$e ty!es of economic systems listed in (a) a"ove. (4mks)

(c) Su&&est t%o %ays "y %$ic$ t$e &overnment of your country can control "usiness activity.(4mks)

Total 10 marks

Before readin& t$e discussion and &uidelines to ans%erin& t$e 'uestion you may %is$ to !lan an

ans%er t$at you %ould &ive to t$e 'uestion. emem"er t$ere may "e ot$er !ossi"le ans%ers t$ant$e ones su&&ested.

!"#$""!%& '& G$!!&"

(a) Any t%o ty!es of economic systems can "e listed for e#am!le t$e free economic system andt$e !lanned economic system. T$is !art of t$e 'uestion does not re'uire any e#!ansion ore#!lanation.

(") T$e c$aracteristics or features of t$e economic systems listed can "e used to s$o% t$edifferences "et%een t$em.

Con*unctions suc$ as %$ereas on t$e ot$er $and %$ile and $o%ever s$ould "e used to indicateyour reference to t$e o!!osite feature for t$e ot$er economic system. +or e#am!le in t$e freeeconomy most of t$e scarce resources are o%ned and allocated "y !rivate individuals and firms%$ile in t$e !lanned economy scarce resources are o%ned and allocated "y t$e &overnment.

T$e mar,s allotted for t$is !art of t$e 'uestion %ould indicate t$at a minimum of t%o differencesis re'uired.

(c) Governments- control of "usiness activity can come in many forms includin&

/ Le&islation T$e !assin& of la%s t$at "usinesses s$ould a"ide "y.

/ 0rice controls Government stated ma#imum !rices for selected &oods and services

/ ationalisation 2irect o%ners$i! and control of industries "y t$e Government for e#am!le%$ere mono!olies are e#!loitin& consumers.

/ Increased ta#ation To reduce mono!oly !rofits.



e&istration and ot$er le&al re'uirements for settin& u! of "usinesses.

/ Em!loyment of ins!ectors to monitor t$e affairs of "usinesses e.&. !rice ins!ectors and sanitaryins!ectors.

/ Settin& u! of &overnment a&encies suc$ as T$e Bureau of Standards to monitor t$e 'uality of&oods !roduced and im!orted.

emem"er you are as,ed to su&&est only t%o %ays.

2) &o* let+s moe on to another question. #-# past paper MayJune 200/ (General),

Question 1.

(a) List TW functions of a "usiness. (3 mar,s)

(") Briefly descri"e TW of t$e follo%in& ty!es of "usiness or&anisations

(i) 0artners$i!(ii) 0u"lic Limited Com!any(iii) Co4o!erative (5 mar,s)

(c) State TW advanta&es %$ic$ t$e 0u"lic Limited Com!any $as over t$e 0artners$i! ty!e of "usiness. (5 mar,s)

Total 10 marks.

!"#$""!%& '& G$!!& '&"

(a) Any TW functions of a "usiness can "e listed e.&.to sell &oods and services to satisfy !eo!le-s %ants and to !rovide em!loyment for !eo!le. E#!ansion on and e#!lanation of t$efunctions is not re'uired.

(") T$e TW ty!es of "usinesses can "e descri"ed "y definin& t$em and 6or outlinin& t$eirfeatures or c$aracteristics. +or e.&. in descri"in& t$e !artners$i! one mi&$t say t$at a !artners$i!is formed %it$ t%o to 37 mem"ers %$o !ool t$eir resources to&et$er to run a "usiness %it$ avie% to ma,in& a !rofit.

0artners$i!s are normally re'uired to si&n a 2eed of 0artners$i! and re&ister %it$ t$e e&istrar

of Com!anies.

(c) T$e advanta&es %$ic$ t$e 0u"lic Limited Com!any $as over t$e 0artners$i! ty!e of "usinessincludes t$e fact t$at

/ A lar&er num"er of !art o%ners since t$e 0u"lic Limited Com!any $as a minimum of sevens$are$olders and no ma#imum.



/ 8ore ca!ital can "e raised t$an in a !artners$i! since an a!!eal can "e made to t$e &eneral !u"lic t$rou&$ t$e Stoc, E#c$an&e.

/ T$e 0u"lic Limited Com!any is a se!arate entity from t$e s$are$older o%ners t$erefore t$eindividual s$are$olders cannot "e sued t$e com!any must "e sued.

/ T$e 0u"lic Limited Com!any $as a Board of 2irectors elected "y t$e s$are$olders.

/ T$ese com!anies may en*oy economies of scale.

/ is, is s!read over many s$are$olders.

emem"er you are as,ed to state only TW advanta&es of t$e 0u"lic Limited Com!any overt$e 0artners$i!.

/) #-# past paper MayJune 200/ (General) Question .

T$e follo%in& information a!!eared in a daily ne%s!a!er.

Property Services, No. 56 Newpark Saletown

Public Auction Sale

n !anuary 25, 2""2 at #"$"" a.m. % will o&&er &or sale on t'e ate an at t'e place mentione above t'e &ollowin ve'icle$ ne l***

+oyota ini -us

+erms o& Sale$

• Strictly cas' on t'e &all o& t'e 'ammer.

• e'icle on view on t'e mornin o& t'e sale.

• e'icle will be sol as is w'ere is.

/ !o'n -rown, Auctioneer.

Tom 0$illi! %$o lived 37 miles a%ay drove to t$e address on t$e date s!ecified %it$ t$eintention of !urc$asin& t$e mini"us.

n arrival $e %as told "y t$e auctioneer t$at t$e mini"us %as no lon&er availa"le and %as

removed from t$e items to "e auctioned.

Tom 0$illi! "ecame furious t$reatened to sue for "reac$ of contract and demanded a refund of$is travelin& e#!enses

(a) 2efine t$e term 9contract-. (3 mar,s) (") (i) By attendin& t$e !u"lic auctionsale did Tom 0$illi! acce!t a firm offer: (1 mar,)(ii) Give E reason for your ans%er in (")(i) a"ove (3mar,s)



(c) W$at do you understand "y 9ve$icle %ill "e sold as is %$ere is-: (3 mar,s)

(d) (i) 2efine t$e term 9"reac$ of contract-. (3 mar,s)

(ii) State E %ay in %$ic$ a court may settle a "reac$ of contract.

(1 mar,)

(e) State TW %ays "y %$ic$ a contract can "e terminated or disc$ar&ed (5 mar,s)

(f) (i) S$ould ;o$n Bro%n refund Tom 0$illi!-s travelin& e#!enses: (1mar,)

(ii) Give E reason for your ans%er to (f)(i) a"ove. (3 mar,s)

(&) (i) Advise Tom 0$illi! %$et$er $e %ill succeed in court a&ainst ;o$n Bro%n. (1 mar,)

(ii) Give E reason for your advice in (&)(i) a"ove. (3 mar,s)

Total 20 marks

!"#$""!%& '& G$!!& '&"

/ (a) <ou must "e careful to define a contract and not an a&reement. A contract is defined as ale&ally "indin& a&reement or an a&reement t$at is created %it$ le&al intentions.

If you state t$at a contract is an a&reement %it$out statin& any le&al as!ect you may only score$alf of t$e mar,s since all contracts are a&reements "ut not all a&reements are contracts.

/ (") (i) T$e ans%er to t$is !art of t$e 'uestion is sim!ly .

(ii) T$e ve$icle %as not offered for sale t$erefore one cannot acce!t an offer t$at %as not made.An acce!tance 8=ST "e to a firm offer.

/ (c) T$is means t$at t$e ve$icle is to "e sold in t$e condition t$at it is !resently in at t$e !lace or !$ysical locality t$at it is at.

(d) (i) Breac$ of contract means t$at a !arty or !arties to t$e contract fail to ,ee! t$eir !art or !arts to t$e contract.

(ii) T$e court can rule t$at t$e !arty t$at $as "reac$ed t$e contract "e forced to a"ide "y t$eirside of t$e contract. r %it$ t$e in*ured !arties a&reement t$e e#istin& contract can "eterminated and a ne% one can come into e#istence t$at satisfies all !arties.

/ (e) T$ere are a num"er of %ays in %$ic$ a contract can "e disc$ar&ed or terminated. <ou areas,ed to state TW %ays. Some %ays are su&&ested "elo%

/ By deat$ of eit$er !arty to t$e contract



/ By "an,ru!tcy %$ic$ must "e !roven in t$e le&al sense.

/ By frustration %$ic$ means t$at somet$in& %$ic$ %as !ossi"le at t$e time t$e contract %asmade no% "ecomes im!ossi"le .

/ T$e a&reed time for t$e contract to ela!se $as !assed.

/ By a&reement of all concerned !arties

/ By "reac$. >o%ever in t$is case t$e contract can only "e terminated %it$ t$e !ermission of t$ein*ured !arty.

/ By la%. T$is is %$en somet$in& t$at %as le&al at t$e time t$e contract %as made no% "ecomesille&al "y la%. T$erefore t$e contract must come to an end.

/ (f) (i) o ;o$n Bro%n s$ould not refund Tom 0$illi!:s travelin& e#!enses.

(ii) T$ere %as no contract and no "reac$ of contract.

Tom 0$illi! too, it u!on $imself to ma,e t$e *ourney to t$e auction and so t$e cost of doin& somust fall on $is o%n s$oulders

(&) (i) Tom 0$illi! %ill T succeed in court a&ainst ;o$n Bro%n.

(ii) T$ere %as no contract and t$ere %as no "reac$ of contract. >e %ould %in t$e case if ane#istin& contract $ad "een "reac$ed.

3) #-# past paper MayJune 2003 (General) question 3.

Tasty +ruit Ltd. is a manufacturer of several ty!es of e#otic tro!ical fruit *uices. Wit$outconsultation 8r. Al"ert t$e &eneral mana&er too, a decision t$at %it$ immediate effect all "rea,s %ould "e reduced from 1? minutes to five minutes. >e claimed t$at t$e c$an&e "ecamenecessary to ena"le t$e factory to !rocess a lar&er amount of fruit *uices daily.

(a) W$at ty!e of leaders$i! style did 8r. Al"ert a!!ear to "e !ractisin&: (3 mar,s)

(") (i) ame TW ot$er leaders$i! styles. (3 mar,s)

(ii) 2escri"e E of t$e leaders$i! styles you named in (")(i) a"ove. (3 mar,s)

(c) Identify TW situations t$at can result from t$e action ta,en "y 8r. Al"ert. (5 mar,s)

(d) (i) State +I@E 'ualities of a &ood mana&er. (? mar,s).

(ii) Give an e#am!le to s$o% $o% lac, of one of t$e 'ualities you mentioned at (d)(i) a"ove canaffect t$e o!eration of t$e factory. (3 mar,s)



(e) State T>EE res!onsi"ilities of mana&ement to its em!loyees. ( mar,s)

+otal 2" marks

!"#$""!%& '& G$!!& '&"

(a) Autocratic6Aut$oritarian leaders$i! style.

(") (i) Any TW of t$e follo%in& can "e named laisse4faire6free rei&n leaders$i! styledemocratic leaders$i! style c$arismatic leaders$i! style.(ii) Laisse4faire individuals are &iven t$e "road outlines "ut left on t$eir o%n to carry out t$ema*or as!ects of t$e decisions.2emocratic t$ose %$o %ill "e affected "y t$e decision are consulted "efore t$e decision is ta,ent$ou&$ t$e leader still reserves t$e ri&$t to ma,e t$e final decision.C$arismatic t$e leader leads "y virtue of $is6$er !ersonality or c$arisma. Any E of t$eleaders$i! styles can "e descri"ed.

(c) T$e follo%in& situations may result !oor mana&ement4%or,er relations$i! industrial actionmay "e ta,en "y %or,ers resi&nations "y %or,ers %or,ers may "ecome discontented !oor self4esteem of %or,ers and reduced !roductivity of %or,ers. Any TW situations may "e used.

(d) (i) T$e 'ualities of a &ood mana&er include $onesty fle#i"ility a"ility to carry outmana&ement functions and res!onsi"ilities s$o% &enuine concern for em!loyees and customersa"ility to motivate %or,ers "e ada!ta"le to various situations a"le to %or, on o%n initiativea"ility to use 8ana&ement Information Systems "e a&&ressive "ut not too a&&ressive "erelia"le etc.(ii) If for e#am!le t$e mana&er is una"le to motivate $is em!loyees t$ey %ill "ecome la# and

!roductivity %ill fall. T$e "usiness %ill end u! loosin& !rofits.T$e ne&ative effects of t$e lac, of any of t$e 'ualities you listed in (d)(i) can "e e#!lained.

(e) es!onsi"ilities of mana&ers to em!loyees include to treat t$em fairly to &ive t$em safeclean environment to %or, in to allo% t$em t$e freedom to *oin trade unions to su!!ort t$eirdesires to "e educated and trained to !ay fair %a&es and salaries to $onour leave entitlement to&ive ade'uate com!ensation for in*ury on t$e *o" etc. Any T>EE res!onsi"ilities can "e stated.

) #-# past paper January 200, (General) question .

ecently t$e em!loyees of t$e tele!$one com!any $ave en&a&ed in various industrial activities

in su!!ort of t$eir trade union. T$e trade union %as involved in 9collective "ar&ainin&- %it$ t$emana&ement of t$e com!any for a ne% t$ree4year industrial a&reement for its mem"ers. T$emana&ement retaliated "y ta,in& certain actions a&ainst t$e em!loyees %$o c$ar&ed t$at t$eirri&$ts %ere "ein& violated.

(a) Give +I@E e#am!les of industrial activities %$ic$ t$e em!loyees could $ave en&a&ed in%it$out stri,in&. (? mar,s)



(") Identify TW actions t$e mana&ement could $ave ta,en in retaliation a&ainst t$e industrialactivities "y t$e %or,ers. (3 mar,s)

(c) E#!lain t$e term 9collective "ar&ainin&-. (3 mar,s)

(d) List +I@E res!onsi"ilities of t$e mana&ement to its em!loyees. (? mar,s)

(e) A!art from 9collective "ar&ainin&- outline T>EE ot$er functions of a trade union. (Dmar,s)

+otal 2" marks

!"#$""!%& '& G$!!& '&"

(a) E#am!les of industrial action a!art from stri,in& include sic, out &o4slo% sit4in overtime "an %or,4to4rule and "oycottin& t$e com!any-s !roducts etc.

(") T$e action t$at mana&ement could $ave ta,en includes loc,outs "lac,4listin& sus!ensionstermination of %or, contracts deductions of salary etc.

(c) Collective "ar&ainin& refers to t$e trade union function in %$ic$ t$e trade union re!resentin&t$e %or,ers and t$e em!loyer or em!loyers- association discuss issues relatin& to em!loyees %it$a vie% to settlement %$ic$ is suita"le to "ot$ sides.

(d) See ans%er (e) in !revious 'uestion.

(e) t$er functions of t$e trade union include securin& "etter %a&es and frin&e "enefits for

%or,ers securin& "etter %or, environment *o" security ensurin& t$at %or,ers &et t$e leave t$eyare entitled to ensurin& t$at %or,ers are not e#!loited in any %ay education of mem"ers as tot$e role of trade unions sc$olars$i!s to mem"ers and family etc. T$e T>EE !oints c$osens$ould "e e#!anded on "y "rief e#!lanations and 6or e#am!les.

4) 5ast #-# paper MayJune 2002, (General) question 6.

8any &overnments t$rou&$out t$e Cari""ean re&ion $ave "een encoura&in& !ersons to "ecomeentre!reneurs.

(a) W$at do you understand "y t$e term 9entre!reneur-: (2 marks)

(") Su&&est T>EE reasons %$y entre!reneurs$i! is "ein& encoura&ed in your country. (0 marks)

(c) List T>EE c$aracteristics of a successful entre!reneur. (0 marks)

(d) 2iscuss TW !ro"lems an entre!reneur may encounter. (6 marks)



(e) utline $o% an entre!reneur may overcome any E of t$e !ro"lems discussed in (c) a"ove.(2 marks)

(f) List += %ays in %$ic$ &overnments may assist entre!reneurs. (4 marks)

Total 20 marks

!"#$""!%& '& G$!!& '&"

(a) T$e entre!reneur is a $uman factor of !roduction t$at is res!onsi"le for or&anisin& t$e ot$erfactors of !roduction and "earin& t$e ris,s in !roduction.

(") Amon& t$e reasons %$y entre!reneurs$i! is "ein& encoura&ed are entre!reneurs$i! !rovideso!!ortunity for self em!loyment it also reduces unem!loyment it increases t$e !roduction of&oods and services increases t$e variety of &oods and services !roduced Gross ational 0roductis increased ma,es use of idle s,ills and uses u! local ra% materials. Any T>EE reasons may

"e su&&ested.

(c) T$e c$aracteristics of a successful entre!reneur are many and varied. T$ey include a"ility to%or, $ard a"ility to ta,e calculated ris,s a"ility to ma,e effective decisions a"ility to or&anisea"ility to motivate and t$e a"ility to t$in, 'uic,ly and clearly in any situation. A&ain anyT>EE c$aracteristics may "e listed.

(d) T$e !ro"lems of t$e entre!reneur include !ro"lems in sourcin& ca!ital lac, of mana&erials,ills lac, of suita"le collateral ina"ility to assess mar,et !otential ina"ility to evaluatecom!etition lac, of a!!ro!riate tec$nolo&y and t$e ina"ility to !rocure suita"le mac$inery ande'ui!ment.<ou s$ould e#!and on t$e TW !ro"lems you c$oose to discuss "y e#!lainin& t$em

and &ivin& e#am!les.

(e) <ou s$ould "e&in t$is !art of your ans%er "y statin& t$e !ro"lem selected and t$en outlineyour su&&estion for overcomin& t$e !ro"lem. +or e#am!le if you select t$e !ro"lem of t$edifficulty in sourcin& ca!ital you could su&&est t$at t$e entre!reneur e#!lore several sources ofca!ital and t$at $e even com"ine different sources of ca!ital suc$ as $is o%n savin&s alon& %it$a loan from a "an, or credit union.

(f) T$e %ays in %$ic$ &overnments can assist entre!reneurs include !rovidin& t$em %it$ 9softloans- (loans %it$ little or no interest) !rovidin& education and trainin& on enter!risemana&ement &ivin& ta# incentives !rovidin& entre!reneurial consultants to monitor and assist

entre!reneurs !rovidin& factory s$ells for t$em to o!erate t$eir "usinesses in and !rovidin&mar,ets for t$eir &oods and services. Any += %ays can "e listed.

6) #-# past paper January 2001,( General), question 2.

+or many years !ersons from Cari""ean territories $ave mi&rated to Euro!e and ort$ America.@ery often t$ese !ersons only return for $olidays or u!on retirement.



(a) E#!lain %$at is meant "y mi&ration. (2 marks).

(") State T>EE ne&ative effects of mi&ration on t$e la"our force in your country.(0 marks).

(c) E#!lain TW !ositive effects mi&ration may $ave on your country (5 mar,s).

(d) Identify E measure your country uses to encoura&e nationals to return.(# mark).

Total 10 marks

!"#$""!%& '& G$!!& '&"

(a) 8i&ration refers to t$e !ermanent movement of !eo!le from one area to anot$er %it$in acountry (internal movement) or from one country to anot$er (e#ternal movement) for at least

one year. T$e correct time !eriod of t$e movement must "e included in your e#!lanation in order to o"tain full mar,s.

(") T$e ne&ative effects of internal or e#ternal mi&ration or "ot$ may "e &iven. Internally t$ene&ative effects of mi&ration include s$orta&e of la"our in one area and sur!lus of la"our inanot$er area over!o!ulation in one area %it$ resultin& social disorders e.&. crime etc. E#ternalmi&ration results in ne&ative effects suc$ as 9t$e "rain drain- families a"andoned and left to fendfor t$emselves "y mi&rants lo%er standard of livin& etc. Any t$ree ne&ative effects %ill "eacce!ted.

(c) 8i&ration can $ave !ositive effects on a country.

T$is is es!ecially true of e#ternal mi&ration %$ic$ reduces t$e strain on t$e &overnment in cases%$ere t$e mi&rants %ere !reviously unem!loyed. Also many of t$ese mi&rants return years laterand contri"ute !ositively to t$eir countries t$rou&$ s,ills learnt in ot$er countries and6or t$rou&$money t$ey "rin& "ac,.T$e !oints "rou&$t out must "e e#!lained accurately in order to score full mar,s.

(d) Governments may encoura&e nationals to return "y offerin& attractive and afforda"le$ousin& *o"s for t$ose %$o re'uire t$em "y allo%in& t$em to return %it$ t$eir !ersonal effects%it$out $avin& to !ay duties or only re'uirin& t$em to !ay small amounts of duty "y ensurin&t$at t$eir country is as close to crime4free as !ossi"le etc. Any one measure !ro!erly stated %ill "e acce!ted.

7) #-# January 2000 paper (General) , question 4.

a!id structural c$an&e is "ein& e#!erienced t$rou&$out t$e %orld "rin&in& %it$ it a &ro%in&im!ortance of t$e contri"ution of small firms6"usinesses to economic develo!ment in everycountry. 8any industries and firms are no% "uyin& and sellin& &oods via t$e com!uter t$rou&$ asystem called t$e Internet.



(a) 2efine t$e term small "usiness. (2 marks).

(") Given t$e follo%in& sectors in t$e Cari""ean indicate %$ic$ += are most li,ely to "edominated "y small "usinesses(i) "au#ite !roduction

(ii) retailin&(iii) a&riculture(iv) !etroleum refinin&(v) finance and "an,in&(vi) !ersonal services(vii) fis$in&. (4 marks).

(c) 2iscuss += %ays t$rou&$ %$ic$ small "usiness!ersons can use t$e Internet to assist t$emin t$eir "usiness &oals. (1 marks).

(d) Su&&est T>EE reasons %$y t$e &overnment of your country s$ould encoura&e t$e &ro%t$

of small "usinesses as a %ay to !romote economic develo!ment. (6 marks).

Total: 20 marks

!"#$""!%& '& G$!!& '&"

(a) T$ere are a num"er of acce!ta"le definitions of t$e small firm. <ou may %is$ to use any oft$e t$ree definitions from Trinidad and To"a&o or any ot$er definition t$at you are comforta"le%it$. T$e Trinidad and To"a&o definitions are

/ A firm %$ose total assets e#cludin& land and "uildin&s does not e#ceed TT?77777.

/ Accordin& to T$e Central Statistical ffice a small "usiness is a "usiness t$at em!loys lesst$an 17 %or,ers.

/ A firm t$at em!loys only one to! mana&er %$o s$ould mana&e t$e "usiness and !erform ot$erfunctional duties as %ell.

Generally s!ea,in& a small firm is one %it$ virtually no middle mana&ement i.e. t$ere is $ardlyany su!ervisors or su"ordinate mana&ers.

(") T$e += sectors most li,ely to "e dominated "y small "usinesses are retailin& a&riculture

!ersonal services and fis$in&.

(c) T$e Internet allo%s small "usiness !ersons to communicate %it$ ot$ers in t$e same field &etinformation and ideas t$at are current in t$eir field advertise t$eir !roducts source ra% materialsand &oods at reasona"le !rices source mar,ets6outlets for t$eir &oods and services &et access toInternet "uyin& and sellin& %$ic$ "oosts sales etc. T$e !oints must "e discussed fully to s$o%$o% t$e small "usiness "enefits from t$e Internet in order to &ain t$e full ei&$t mar,s.



(d) Governments s$ould encoura&e t$e &ro%t$ of small "usinesses "ecause

/ T$ey !rovide $ealt$y com!etition to lar&er firms and force t$em to sell at more reasona"le !rices.

/ Small "usinesses reduce unem!loyment t$rou&$ em!loyin& !eo!le.

/ T$ey !roduce &oods and services t$at !eo!le %ant and t$is %ill increase standard of livin&.

/ T$ey contri"ute to%ards G06ational Income.

/ T$ey use u! natural and ot$er idle resources.

/ T$ey !rovide lin,a&es to ot$er firms so t$ey can "e certain of t$eir sources of ra% materialsand6or t$eir outlets.

/ e% ideas are usually tried out in small firms.

/ Small firms often &ro% into lar&er successful "usinesses t$ese firms are fle#i"le and can !roduce %$at is re'uired for economic develo!ment. T$e T>EE reasons c$osen must "edevelo!ed !ro!erly in order to &ain t$e full si# mar,s.

8) #-# (General) paper MayJune 1888, questions si9 an: seen.

Let us start %it$ 'uestion si#

a) Classify t$ree ty!es of !roductive activities. (0 mks)

(") Identify t$ree ty!es of !roductive activities t$at are carried out in t$e Cari""ean and list t$ecountry in %$ic$ eac$ is carried out. (6 mks)

(c) (i) State five factors %$ic$ determine t$e location of an industry. (5 mks)

(ii) 2iscuss t$ree economic and social im!lications of tec$nolo&ical develo!ement. (6 mks)

Total: 20 mks

!"#$""!%& '& G$!!& '&"

(a) T$ere are four ty!es of !roductive activities e#traction construction manufacturin& andservice activities. Any t$ree of t$e four can "e used for t$e ans%er.

(") A num"er of activities and countries can "e used for t$is ans%er. Consider t$e follo%in&

A&riculture ;amaica+is$in& Bar"ados



8inin& GuyanaConstruction Trinidad8anufacturin& TrinidadTrans!ort St. LuciaTourism ;amaica

Communication Bar"ados

<ou s$ould note t$at ot$er activities and countries may "e considered $o%ever you s$ouldidentify t$ree different !roductive activities and t$e countries in %$ic$ t$e activities areo"served.

(c) (i) T$e factors t$at influence t$e location of industry include land nearness to mar,etsnearness to ra% materials nearness to a suita"le la"our su!!ly nearness to !o%er climateinfrastructure and t$e &overnment.

(ii) T$e economic and social im!lications of tec$nolo&ical develo!ment include increased

out!ut im!roved standard of livin& or 'uality of life &reater s!eed in !roducin& im!roved'uality of !roduction structural unem!loy4ment !$ysical im!airment and stress and alienation.

ote t$at t$e !oints discussed can "e economic or social in nature and may also "e !ositive orne&ative. Eac$ im!lication must "e discussed not listed for full mar,s.

10) &o* for the secon: an: final question for this lesson.

(a) 2ifferentiate "et%een t$e terms 9mar,et- and 9mar,etin&-. (2 mks)

(") List four mar,etin& activities. (4 mks)

(c) Identify four factors influencin& t$e "e$aviour of consumers in t$eir c$oice of local$am"ur&ers over forei&n $am"ur&ers. (1 mks)

(d) 2iscuss t$ree met$ods a local "usiness may use to !romote local $am"ur&ers. (6 mks)

Total: 20 mks

!"#$""!%& '& G$!!& '&"

(a) A mar,et refers to a situation in %$ic$ "uyers and sellers are in contact for t$e !ur!ose of

"uyin& and sellin& &oods and services. 8ar,etin& on t$e ot$er $and refers to everyt$in& t$at isdone to &et &oods and services to t$e ri&$t !eo!le at t$e ri&$t time and !riced in t$e mostefficient manner %$ile ma,in& a !rofit.

(") Any four mar,etin& activities can "e listed.

Included are mar,et researc$ advertisin& sales !romotion "randin& distri"ution sales !ricin& !u"lic relations researc$ and develo!ment mar,etin& mi# etc.



(c) Taste tradition 'uality !rice "rand loyalty income ,no%led&e of t$e o%ners conveniencet$e %ay t$e &ood is advertised etc.

(d) 8et$ods of !romotion t$at can "e used include advertisin& sales !romotions !u"licity !u"lic relations and com!etitive !ricin&. Eac$ met$od s$ould "e discussed e.&. advertisin& may

increase t$e demand for local $am"ur&ers. T$e "usiness %ill sell more and ma,e more !rofit.

11) #-# past paper, January 2001, General 5roficiency, Question 4.

T$is 'uestion is "ased on economies and diseconomies of scale and mec$anisation.

Com!any F< Ltd. manufactures and mar,ets a ran&e of candles of different s$a!es andlen&t$s. Since its incor!oration in 1HH sales volume $as increased tenfold. In order to meetdemand t$e com!any $as $ad to e#!and its !roduction ca!acity and su!!ort systemsconsidera"ly.

(a) List += internal economies of scale t$e com!any mi&$t e#!erience. (4 marks)

(") Identify += diseconomies of scale t$e com!any mi&$t e#!erience. (4 marks)

E#!ansion $as invaria"ly led to increased mec$anisation of various as!ects of a "usiness.

(c) (i) E#!lain += "enefits t$e com!any mi&$t e#!erience "ecause of mec$anisation. (1

marks)

(ii) 2iscuss TW ne&ative effects t$e introduction of mec$anisation mi&$t $ave on t$e com!any.(4 marks)

Total; 20 marks

!"#$""!%& '& G$!!&" '&"

(a) <ou %ill remem"er t$at economies of scale refers to advanta&e to a firm or com!any from&oin& into lar&e4scale !roduction. T$e economies of scale include

• Tec$nical economies6economies in t$e use of factors of !roduction.

• 8ana&erial economies6economies in administration.

• esearc$ and develo!ment economies.

• +inancial economies.

• 8ar,etin& economies6commercial economies.



• Social economies.

• is,4"earin& economies etc.

Any += economies or advanta&e may "e listed.

(") 2iseconomies of scale refers to t$e disadvanta&es to a firm or com!any from lar&e4scale !roduction. T$e diseconomies include

• Increased costs e.&. increased mar,etin& and financial costs.

• 9ed ta!e- %$ic$ is t$e ela"orate and time4consumin& !rocedures t$rou&$ %$ic$

consumers must !ass.

• C$an&in& tec$ni'ues of !roduction may cause e#!ensive mac$inery to lay idle.

• Lar&er "usinesses often result in loss of coordination and lac, of control e.&.

communication "et%een mana&ement and %or,ers may slo% do%n %asta&es of factorsetc.

Any += diseconomies or disadvanta&es may "e listed.

(c) (i) ecall t$at mec$anisation means !artially re!lacin& $uman or animal muscle !o%er "y amac$ine e.&. a tailor "uyin& a se%in& mac$ine instead of se%in& "y $and. T$e "enefits ofmec$anisation include

•

ut!ut increases "ecause %or, is s!eeded u! and more can "e !roduced in less time.

• +e%er %or,ers are needed as mac$ines can do t$e %or, of a num"er of !ersons.

• Costs are saved. T$ese costs t$at are saved can "e transferred to t$e mar,et in t$e form of

lo%er !rices to consumers.

• T$e 'uality of out!ut often increases.

• It encoura&es more s,illed %or,ers to enter t$e %or,force i.e. %or,ers %$o can o!erate

s!ecific mac$inery etc.

Any += "enefits can "e e#!lained. +or full mar,s t$e "enefits must "e "rou&$t out clearly.

(ii) T$e ne&ative effects of t$e introduction of mec$anisation on t$e com!any mi&$t include

• =nem!loyment caused "y t$e fact t$at less la"our is re'uired t$an %$en %or, is done

entirely "y $and t$erefore t$e e#cess la"our is normally laid off.



• Some mac$ines are of a tec$nical nature and re'uire s,illed !ersons to o!erate t$em. In

some cases t$ese s,illed !ersons are $ard to find.

• W$en mac$ines are out of service over$ead cost increase.

• 8ac$ines may "e costly to maintain as in some cases !arts may $ave to "e im!orted %it$t$e use of scarce forei&n e#c$an&e.

As in (c) (i) a"ove t$e ne&ative effects of mec$anisation must "e !ro!erly discussed in order to&ain full mar,s.

12) #-# past paper, January 2001, General, question 7

T$e Cari""ean island of Green 8ountain is $avin& !ro"lems %it$ its financial institutions.Customers of some "an,s are addin& to t$e !ro"lems as many $ave %it$dra%n t$eir de!ositsfrom t$e "an,s. T$e &overnment $as as,ed t$e central "an, to do all it can to !revent a colla!se

of t$e commercial "an,in& sector.

(a) State += c$aracteristics of money. (4 marks)

(") List TW functions or services offered "y commercial "an,s. (2 marks)

(c) +or EAC> of t$e functions mentioned a"ove e#!lain %$at "enefit customers o"tain fromusin& t$ese functions. (4 marks)

(d) List += features of central "an,s. (4 marks)

(e) Select T>EE of t$e features of central "an,s you mentioned a"ove and e#!lain $o% t$ey$el! to !romote smoot$ o!eration of t$e "an,in& system in your country. (6 marks)

Total marks; 20

!"#$""!%& '& G$!!& '&"

(a) <ou must "e careful not to confuse t$e c$aracteristics of money %it$ t$e functions of money.

T$e c$aracteristics of money are t$e features of money. 8oney s$ould "e

• Generally acce!ta"le

• 2ura"le or lon&4lastin&

• >omo&eneous

• 2ivisi"le into lar&e and small units



• Scarce or limited in su!!ly

• 0orta"le

Any += c$aracteristics may "e stated.

(") T$e functions or services offered "y commercial "an,s today are many and varied. T$eyinclude t$e follo%in&

• Acce!t de!osits from customers for safe,ee!in& and ma,es t$ese de!osits availa"le to

customers %$en needed.

• Lend money to 'ualified customers at interest.

• Allo% standin& order !ayments at customers- re'uests.

• 8a,e t$e use of t$e c$e'ue as a means of !ayment !ossi"le.

• Sell travellers- c$e'ues and "uy and sell forei&n currency.

• Give financial advice to customers.

• >el! customers to o!en letters of credit.

• Act as a&ents in collectin& dividends on "e$alf of t$eir customers.

• Act as e#ecutors and trustees to t$e %ritten %ills of t$eir customers.

• Allo% customers use of t$e "an,s- safety de!osit "o#es and ni&$t safe facilities etc.

Any TW functions or services may "e listed.

(c) W$ic$ever TW functions you c$oose to e#!lain you must ensure t$at you !ro!erly e#!laint$e "enefits of t$em to t$e customer. +or e#am!le

T$e function of acce!tin& de!osits from customers "enefits t$e customers in t$at it allo%s t$emto ,ee! t$eir money in a safe !lace instead of ,ee!in& it at $ome. In addition for most de!osit

accounts t$e customer earns interest on $is de!osits and t$is encoura&es $im to save %it$commercial "an,s.

Commercial "an,s lend money to 'ualified customers "y o!enin& loan accounts "y means ofoverdrafts and "y discountin& "ills of e#c$an&e. W$atever t$e met$od customers are &rantedloans and "enefit from lar&e sums of money %$ic$ t$ey !er$a!s could not save for %$ile t$ey "enefit in "ein& a"le to !ay "ac, loans in small installments. Customers "enefit in &ettin& loansfor various !ur!oses includin& education vacation and for !urc$asin& cars and ot$er assets.



(d) T$e features of t$e central "an, includes

• Carryin& out &overnment-s monetary !olicies.

• Control and monitorin& of commercial "an,s and ot$er financial institutions.

• Issuin& notes and coins and recallin& t$em from circulation %$en necessary.

• Bein& "an,er to commercial "an,s and to t$e &overnment.

• e&otiatin& on "e$alf of t$e &overnment in international financial a&reements e.&. %it$

t$e I8+ etc.

Any += features may "e listed.

(e) A&ain in e#!lainin& t$e T>EE c$osen features you must "e careful to s$o% $o% t$ey !romote smoot$ o!erations of t$e "an,in& system. +or e#am!le in monitorin& t$e commercial "an,s and ot$er financial institutions t$e central "an, ensures t$at &overnments- monetary !olicies are carried out and t$at t$ey are not !romotin& t$e o!!osite !olicy %$ic$ %ould causec$aos in t$e financial system and in t$e country. <ou must e#!lain T>EE features in li,emanner.

1/) #-# past paper, MayJune 200, <eneral, question 8

T$e 'uestion re!roduced "elo% surrounds t$e to!ic of international trade and "alance of !ayments

T$e follo%in& information %as ta,en from t$e final accounts of Tro!icalo a country in t$eCari"ee Isles. T$e fi&ures are 'uoted in =S (8).

=S@isi"le tradeE#!orts 35 777Im!orts 3D 777Invisi"le (net)E#!orts 37 777Im!orts 1? 777

(a) (i) 2ifferentiate "et%een a country-s terms of trade and its "alance of trade. (0 mks)

(ii) Calculate Tro!icalo-s "alance of trade usin& t$e fi&ures &iven a"ove. (2 mks)

(") Calculate Tro!icalo-s current account "alance usin& t$e fi&ures &iven a"ove. ( m,s)

• <ou are not re'uired to e#!lain t$e calculations in (a) (ii) and (").



(c) Identify t%o %ays in %$ic$ a country may $ave a sur!lus on its current account. (4 mks)

(d) (i) E#!lain %$at is meant "y 9"alance of !ayment-. (2 mks)

(ii) 2iscuss t$ree %ays "y %$ic$ a country %ould "e a"le to finance t$e deficit in its "alance of

!ayments. (6 mks)

Total 20 marks

!"#$""!%& '& G$!!& '&"

(a) (i) A country-s terms of trade refers to t$e rate at %$ic$ its &oods and services e#c$an&e fort$e &oods and services of anot$er country. It is calculated as

Inde# of e#!ort !rices # 177Inde# of im!ort !rices

W$ereas a country-s "alance of trade is t$e difference "et%een t$e country-s im!orts and e#!ortsof &oods only. To !ro!erly differentiate "et%een t$e t%o terms t$e candidate s$ould use termssuc$ as 9on t$e ot$er $and- 9%$ile- 9%$ereas- etc.

(ii) T$e "alance of trade in t$is case is

35777 J 3D777

43777=S (8)

(minus 3777 =S(8) )

(") T$e current account "alance ta,es into consideration t$e visi"le trade "alance and t$einvisi"le trade "alance. +rom (a) (ii) %e found t$e visi"le trade "alance ("alance of trade) to "eminus 3777 =S (8). T$e invisi"le trade "alance is !lus ?777 =S (8). T$is is t$e difference "et%een invisi"le e#!orts and invisi"le im!orts. T$e current account "alance is !lus 777 =S(8).

•

(c) E#!ortin& more &oods and services t$an it im!orts

• Im!ort less t$an it e#!orts

• If t$e !ositive visi"le "alance e#ceeds t$e ne&ative invisi"le "alance

(d) (i) A country-s "alance of !ayments is its annual record of tradin& %it$ ot$er countries interms of income from e#!orts and e#!enditure for im!orts.



(ii) To finance a deficit is different from correctin& t$e deficit. To finance t$e deficit t$e countrymust find %ays to ma,e t$e "alance of !ayments "alance "y coverin& t$e deficit. T$is includes

• Im!ortin& t$e deficit amount on credit

• Loans from ot$er countries

• Loans from international financial institutions e.&. International 8onetary +und and t$e

World Ban,.

• 2e"it t$e forei&n reserves account

• Grants from ot$er countries

• Sell &old reserves etc.

Any s$ort4term solution %$ic$ results in t$e amount of money to cover t$e deficit if !ro!erlydiscussed %ill earn t%o mar,s eac$.

13) January 2004, General past paper, question num=er ei<ht

Government $as a res!onsi"ility to !rotect consumers as %ell as to !rovide a climate for "usinesses to survive.

(a) State TW reasons %$y consumers need !rotection. (4 mks)

(") Identify T>EE %ays in %$ic$ t$e &overnment of your country can ensure t$at consumers-safety and %ell4"ein& are !rotected. (6 mks)

(c) 2iscuss T>EE %ays in %$ic$ t$e &overnment may $el! "usinesses to succeed. (6 mks)

(d) State TW %ays "y %$ic$ t$e &overnment can ensure t$at "usinesses !rotect t$eenvironment. (4 mks)

Total ; 20 marks

o% for my discussion and &uideline ans%ers. I $o!e t$ey %ill $el! you in &ettin& a fairunderstandin& of t$e 'uestion.

2iscussion and &uideline ans%ers.

(a) T$ere are many reasons %$y consumers need to "e !rotected. T$ese reasons include t$e factt$at t$ey receive

• S$ort c$an&e s$ort %ei&$ts and s$ort measurements



• =nsafe and !oor 'uality !roducts

• 8isleadin& !rice reductions and false sales

• +alse claims a"out !roducts

• Insufficient &oods for t$eir money

• =nfair treatment %$en faulty &oods are returned etc.

In addition consumers are not al%ays a"le to ma,e a &ood assessment of t$e &oods t$ey "uy.T$ey cannot !rotect t$emselves and t$erefore need to "e !rotected.

Candidates s$ould state clearly any TW reasons for consumer !rotection.

(") Some of t$e %ays in %$ic$ t$e &overnment can ensure t$at consumers: safety and %ell4"ein&are !rotected are

• By settin& u! consumer !rotection a&encies suc$ t$e m"udsman t$e Bureau of

Standards and t$e Consumer Affairs Commission.

• By educatin& and advisin& consumers t$rou&$ !am!$lets radio and T@ !ro&rammes.

• T$rou&$ t$e introduction of !enalties for !roducers and sellers %$o s$o% lac, of re&ard

for consumers.

•By !assin& le&islation6la%s t$at ensure consumer !rotection e.&. !rocessed food acts0u"lic >ealt$ Act T$e Standard Act and T$e +ood and 2ru&s Act.

• By t$e control and su!ervision of !rices.

• By enforcin& fair tradin& !ractices.

• By su!ervisin& $ire !urc$ase and credit control etc.

(c) Government can $el! "usinesses to succeed "y

• Givin& t$em loans %it$ little or no interest to "e !aid "ac,.

• Allo%in& t$em su"sidies and &rants %$ic$ result in t$e lo%erin& of costs of !roduction.

• 0rovidin& "usiness educational o!!ortunities free or at very lo% cost.

• Allo%in& t$e im!ortation of essential ra% materials duty free.



• 0rovidin& free one areas for t$e location of "usinesses.

• educin& cor!oration ta# %$ic$ reduces overall costs and "oosts !rofits.

• Assistin& "usinesses in findin& mar,ets and in t$e mar,etin& of t$eir !roducts etc.

+or t$is !art of t$e 'uestion t$e T>EE !oints selected must "e !ro!erly discussed to score fullmar,s.

(d) T$e !rotection of t$e environment $as "ecome increasin&ly im!ortant. T$e &overnment canensure t$at "usinesses !rotect t$e environment "y

• Introducin& a !ollution ta#.

• Ta,in& over t$e !roduction %$ere "usinesses fail to !rotect t$e environment.

• 0assin& le&islation or la%s a&ainst !ractices t$at dama&e t$e environment.

• >avin& ins!ectors &o around and ensure t$at !ractices are not dama&in& to t$e

environment.

• Givin& %arnin&s %$ic$ if not ad$ered to result in t$e "usiness "ein& ta,en to court or

some ot$er action.

• Encoura&in& t$e location of "usinesses in s!ecial areas %$ere t$eir !roduction !ractices

%ill not $arm t$e environment etc.

1. T$e "asic needs of man are

a) land money car ") food money landc) food clot$in& s$elter d) food s$elter money

3. T$e most im!ortant !rinci!le u!on %$ic$ "arter trade de!ends is ,no%n as

a) insura"le interest

") indemnity !rinci!lec) utmost &ood fait$d) dou"le coincidence of %ants

. 8ary lives in a country in %$ic$ t$e state ma,es all t$e decisions a"out economic activities.T$at country $as ado!ted t$e



a) !lanned economic system ") mi#ed economic systemc) free economic systemd) Ca!italist economic system

5. T$e most im!ortant role of a "usiness in any community is to

a) !ollute t$e environment ") earn forei&n e#c$an&ec) !rovide revenue for t$e &overnmentd) !rovide &oods and services to satisfy t$e %ants of !eo!le

?. Consumers are t$ose individuals %$o

a) "uy t$eir &oods from a consumers coo!erative society ") consume all t$e &oods !roduced "y manufacturers

c) !rovide &oods and services for our satisfactiond) utilise t$e &oods and services !rovided to satisfy %ants

D. T$e !u"lic sector com!rises

a) a "ody of !u"lic cor!orations !u"lic com!anies and munici!al underta,in&s ") a com"ination of !u"lic com!anies and !u"lic cor!orationsc) an association of all !u"lic com!anies %it$in t$e countryd) central and local &overnment or&anisations and state cor!orations

K. W$ic$ of t$e follo%in& "usiness or&anisations "elon& to t$e !rivate sector:

a) munici!al aut$ority ") nationalised industriesc) !u"lic cor!orationsd) !u"lic limited com!anies

. In a !artners$i! an investor is a !artner.

In a lar&e com!any an investor is a

a) sole trader

") mana&er c) director d) s$are$older

H. W$at is t$e ma#imum num"er of s$are $olders a !rivate limited com!any can $ave:

a) t%o ") five



c) fiftyd) ei&$ty

17. T$e relations$i! "et%een t$e $i&$est level of mana&ement do%n to t$e various de!artmentsis ,no%n as

a) flo% ") ran, c) staff d) line

11. If F offers < a "oo, for ? "ut < says t$at $e can only !ay 5.?7 for it t$is is an e#am!le of

a) an offer ") a counter offer c) an invitation to treat

d) consideration

13. An item dis!layed in a store %it$ a !rice ta& is an e#am!le of

a) an offer ") a counter offer c) an invitation to treatd) consideration

1. ;o$n "uys &oods to t$e value of 1?7 "ut is allo%ed 37 trade discount on t$e invoice !lus? cas$ discount. >e %ill t$erefore !ay

a) 113.?7 ") 115.77c) 13D.77d) 153.?7

15. If you received less &oods t$an %as ordered and !aid for your su!!lier %ould send you

a) a credit note ") an invoicec) a de"it note

d) a "ill of e#c$an&e

1?. W$en a c$e'ue is crossed it means t$at

a) somet$in& is %ron& %it$ it ") it is cancelled and not &ood anymorec) t$e money cannot "e %it$dra%n immediately "ut $as to "e lod&ed to an accountd) it can "e ta,en to a "an, and t$e money stated %it$dra%n at once



1D. W$ic$ of t$e follo%in& is t$e most im!ortant c$aracteristic of money:

a) acce!ta"ility ") dura"ilityc) limited su!!ly

d) !orta"ility

1K. T$e only "an, %$ic$ can claim to "e a lender of last resort is t$e

a) merc$ant "an, ") central "an, c) commercial "an, d) trustee savin&s "an,

1. T$e document t$at $as details of t$e source of &oods t$e ra% materials from %$ic$ t$e &oodsare made is called t$e

a) s$i!!in& note ") certificate of ori&inc) "ill of ladin&d) "ill of e#c$an&e

1H. Assurance !olicies s!ecifically refer to

a) !ersonal life covera&e ") covera&e of ris,s involvin& car&o trans!ortc) loss of &oods due to $urricane

d) loss of sale of &oods

37. A man insured $is !ro!erty for 7777 "ut its true value %as 177777. A fire caused17777 %ort$ of dama&e. T$e insurance %ill !ay out

a) 17777 ") 777c) ?777d) D?77

T$e ans%ers to multi!le c$oice 'uestions

1.c 3.d .a 5.d?.d D.d K.d .dH.c 17.d 11." 13.c1." 15.a 1?.c 1D.a1K." 1." 1H.a 37.".

1. W$ic$ of t$e follo%in& is not a factor of !roduction:



(a) food(") land(c) la"our (d) ca!ital

3. W$ic$ one of t$e follo%in& %ill $ave t$e effect of reducin& t$e su!!ly of la"our:

(a) a $i&$ "irt$ rate(") a lar&e !o!ulation(c) a $i&$ !ro!ortion of old !eo!le(d) a lo% !ro!ortion of very youn& !eo!le

. T$e la"our force of a country is

(a) all !eo!le "elo% retirement a&e(") all !ersons %$o are em!loyed or are availa"le for %or,

(c) t$e total !o!ulation(d) all !ersons over t$e sc$ool leavin& a&e

5. T$e education of t$e la"our force is a ma*or determinant of %$ic$ of t$efollo%in&:

(a) t$e su!!ly of la"our (") t$e la"our force as a %$ole(c) t$e mo"ilisation of la"our (d) t$e efficiency of la"our

?. W$ic$ of t$e follo%in& does not $ave a direct effect on t$e efficiency of la"our:

(a) t$e 'uality of education of t$e %or,ers(") t$e %a&es !aid to %or,ers(c) a country-s cultural !ractices(d) %or,in& conditions

D. La"our is classified as

(a) sie a&e mo"ility(") sie and mo"ility

(c) s,illed semi4s,illed and uns,illed(d) s,illed and semi4s,illed

K. T$e re%ards to t$e factors of !roduction are

(a) salaries %a&es !rofit and interest(") %a&es rent !rofit and interest



(c) rent ca!ital and !rofit(d) !rofit ca!ital rent %a&es

. ccu!ational mo"ility of la"our refers to t$e

(a) ease %it$ %$ic$ %or,ers are trans!orted to t$eir *o"s(") fre'uency %it$ %$ic$ %or,ers move from one *o" to anot$er (c) de&ree of efficiency %it$ %$ic$ %or,ers !erform t$eir tas,s.(d) %illin&ness and sta"ility of %or,ers to ac'uire ne% s,ills.

H. Eac$ year some $i&$ sc$ool &raduates of t$e Cari""ean rural communities move to t$e to%nsand cities to live and %or,. T$e movement of suc$ !ersons could "e descri"ed as

(a) e#!ected mi&ration(") e#ternal mi&ration(c) cross4country mi&ration

(d) internal mi&ration

17. 0eo!le %$o mi&rated from t$e West Indies in t$e early 1H?7-s %ent to all of t$e follo%in&countries on a lar&e scale e#ce!t

(a) Great Britain(") ;a!an(c) Canada(d) =nited States of America

11. =nem!loyment t$at results from a 9slum!- in t$e economy can "e descri"ed as

(a) frictional unem!loyment(") seasonal unem!loyment(c) residual unem!loyment(d) cyclical unem!loyment

13. T$e 954>- Clu" and t$e Lion-s Clu" are e#am!les ofM(a) multinational com!anies(") community self4$el! or&anisations(c) mono!olies(d) voluntary c$ain stores

1. atural resources may also "e referred to as(a) ca!ital(") la"our (c) land(d) Entre!reneurial s,ills

15. W$ic$ of t$e follo%in& is t$e "est e#am!le of ca!ital as a factor of !roduction:



(a) mac$inery(") s$ares(c) de"entures(d) money

1?. Circulatin& ca!ital is

(a) money and inventory used to finance t$e day to day runnin& of a "usiness.(") Ca!ital t$at c$an&es from one form to anot$er and "ac, to its ori&inal form(c) T$e money !aid to %or,ers for maintainin& day to day !roduction.(d) Any man4made item t$at assists in !roduction.

1D. W$ic$ of t$e follo%in& is a fi#ed asset:

(a) A "icycle for !rivate use(") A %as$in& mac$ine for resale

(c) A motor car for family use(d) A truc, for delivery of &oods

1K. T$e re%ard to ca!ital is

(a) !rofit(") interest and dividends(c) rent(d) %a&es

1. T$e term 9$uman resources- refers to

(a) materials and &oods made "y $uman "ein&s(") ra% materials used in t$e manufacture of &oods(c) !ersons availa"le for !roductive and !rofessional services(d) ca!ital invested "y s$are$olders in a com!any.

1H. T$e 9>uman esources- are

(a) students in tertiary institutions(") la"our and entre!reneurial s,ills(c) monies used "y $umans in !roduction

(d) resources !roduced "y $umans.

37. A !erson res!onsi"le for "rin&in& to&et$er and or&anisin& t$e factors of !roduction is t$e

(a) entre!reneur (") trade4unionist(c) mana&er (d) financier



End of Test

1. T$e advanta&es of a sole trader over a !artners$i! form of "usiness include %$ic$ of t$efollo%in&:

i) 0rofits are s$ared.ii) is,s are &reater.iii) T$e sole trader is $is or $er o%n "oss.iv) T$e !artners can contri"ute ca!ital to e#!and t$e "usiness.

A) (i) and (ii) onlyB) (i) and (iii) onlyC) (iii) only2) (i) and (iv) only

3. In a !artners$i! an investor is a !artner. In a lar&e com!any an investor is a

A) sole trader.B) mana&er.C) director.2) s$are$older.

. A slee!in& !artner is ot$er%ise ,no%n as a

A) careless !artner.B) active !artner.C) dormant !artner.

2) &eneral !artner.

5. W$ic$ of t$e follo%in& are disadvanta&es of a !rivate limited com!any:

i) It $as an inde!endent le&al status.ii) T$e firm cannot raise ca!ital on t$e stoc, e#c$an&e.iii) T$e firm cannot $ave more t$an ?7 s$are$olders.iv) T$e firm $as too many ta#es to !ay.

A) (i) and (ii) onlyB) (ii) and (iii) only

C) (i) and (iv) only2) (iii) and (iv) only

?. To com!ly %it$ le&al re'uirements to re&ister a !rivate limited com!any t$e firm must !rovide at least t%o documents. T$ese are

A) a !ros!ectus and a certificate of ori&in.B) a memorandum of association and articles of association.



C) a certificate of tradin& and ta# file num"er.2) a s$are certificate and a de"enture certificate.

D. T$ose !artners %$o %$en t$eir "usiness &oes "an,ru!t stand to lose all t$eir !ersonal !ossessions as %ell as t$eir investments are ,no%n as

A) unlimited lia"ility !artners.B) limited lia"ility !artners.C) ordinary !artners.2) slee!in& !artners.

K. T$e form of "usiness %$ere s$ares are allo%ed to "e sold only to o%ners of t$e "usiness or tot$eir relatives or em!loyees is ,no%n as

A) !artners$i!.B) !rivate limited com!any.

C) !u"lic limited com!any.2) multinational com!any.

. T$e main aim of a co4o!erative retail society is to

A) ma,e a !rofit from its mem"er4customers.B) "uy and sell &oods retail.C) "uy &oods %$olesale and sell t$em c$ea!ly to its mem"ers.2) or&anise and !lan t$e runnin& of t$e society.

H. Com!any A o%ns all t$ese "usinesses soft drin, com!any "a,ery s$i!!in& com!any and

motor4car assem"ly com!any. Com!any A is an e#am!le of a

A) con&lomerate.B) multinational.C) !rivate limited com!any.2) !artners$i!.

17. If one com!any A $as or o%ns t$e ma*ority s$ares in anot$er com!any B t$en com!any Acan "est "e re&arded as "ein& a

A) $oldin& com!any.

B) !artners$i!.C) co4o!erative.2) *oint4stoc, com!any.

o% you can $ave a loo, at t$e ans%ers to see $o% %ell you $ave done.

1. C 3. 2. C 5. B



?. B D. AK. B . CH. A 17. A

1 Comment

Gui:elines for 5rinciples of >usiness "chool >ase:

'ssessment (".>.'.)

+e"ruary 3D 3711 at 17K !m (0..B Lessons)

+or students doin& t$e to!ic Esta"lis$in& a Business 0roduction

1. Description of business J In t$is !art you are re'uired to &ive a "rief descri!tion of yourintended "usiness. T$e e#aminer s$ould

(a) T$e name of your intended "usiness e.&. Ftreme Gra!$ics !roduction

(") T$e ty!e of "usiness e.&. sole !ro!rietors$i! etc.

(c) W$at is t$e !ro!osed "usiness en&a&in& in: e.&. !roduction of local fruit *uices

(d) T$e ma*or aims or aims of your "usiness e.&. To ma,e 177 !rofit "y ensurin& customer-ssatisfaction.

(e) If !ossi"le you can &ive e#am!le(s) of t$e &oods and6 services you %ill "e !roducin&.

3. Justification of location ? in t$is !art you are re'uired to

(a) State t$e location of your intended "usiness e.&. 1?3 ;o$n Street

(") Secondly you %ill $ave to list and e#!lain t$e factors %$ic$ influence your c$oice oflocation. (C$ec, your te#t"oo,) e.&. Closeness to ra% materials.

. Selection of appropriate labour J as %e already ,no% la"our is an im!ortant of !roduction

and if you don-t select t$e most a!!ro!riate ty!e of la"our t$en inefficiency %ould ta,e occurand !roductivity %ill decline. <ou are re'uired toN

(a) List t$e ty!e of la"our you %ill en*oy em!loy. e.&. cleaner

(") T$en classify t$em under t$e t$ree main cate&ories of la"our namely

J S,illed

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J =ns,illed

J Semi4s,illed

5. Sources of fixed and working capital J Ca!ital refers to money and all ot$er assets of a

!erson com!any or industry t$at can "e converted into money. 0><SICAL CA0ITAL consistsof fi#ed ca!ital and %or,in& or circulatin& ca!ital. +IFE2 ca!ital refers to ca!ital t$at is of alastin& nature and %$ic$ does not c$an&e its form durin& t$e course of !roduction e.&. factory "uildin&s mac$ines and tractors. WOIG or CIC=LATIG ca!ital c$an&es its form orstate durin& t$e course of !roduction e.&. ra% materials and !artly finis$ed &oods. <ou arere'uired to identify t$e sources of t$ese ca!itals. e.&. loans

?. Roles of te !ntrepreneur J T$e entre!reneur is a ot$er factors of !roduction and "ear ris,s.>uman factor of !roduction %$ose main functions are to or&anie t$e ot$er factors of !roduction. T$e entre!reneur consciously moves resources from an area of lo%er !roductivityand lo%er yield to an area of $i&$er !roductivity and $i&$er yields. <ou are re'uired to list and

"riefly e#!lain t$e roles of t$e entre!reneur. (C$ec, ote "oo,)

D. T"pe of production# 0roduction refers to t$e com"inin& of t$e factors to create &oods andservices to satisfy !eo!le-s %ants and needs. T$e ty!es (sta&es) of !roduction s$ould not "econfused %it$ t$e levels of !roduction. <ou are re'uired to state t$e ty!e(s) of !roduction yourintended "usiness %ill en&a&e itself in. ( C$ec, ote Boo,6 Te#t "oo,)

K. $e%els of &roduction ' T$e levels of !roduction classify t$e amounts of &oods and services !roduced under t$ree different $eadin&s

• su"sistence

• domestic

• sur!lus or e#!ort levels.

. (ualit" control measures# in t$is !art you s$ould "e a"le to define 'uality as it relates toyour "usiness and t$en you %ill state t$e measures6 %ays of ensurin& 'uality in your intended "usiness. E.&. $irin& only trained em!loyees.

H. )se of tecnolog"# We all ,no% t$at tec$nolo&y !lays an im!ortant !art in any "usiness. If "usinesses don-t ada!ts to c$an&es in tec$nolo&y if ultimately lead to ma,in& a loss. <ou are

re'uired to s$o% $o% you %ill em!loy tec$nolo&y in your o!erations.

17. $inkages#. A lin,a&e industry is an industry %$ic$ is associated or connected to ot$erindustries in suc$ a %ay t$at t$e e#istence of one is de!endent on t$e ot$er or it en$ances t$eot$er-s !roduction !rocess. T$ese industries are also referred to as 9s!in4off- and 9scre%driver-industries. <ou %ill "e re'uired to

(a.) state t$e ty!e(s) of lin,a&es your intended "usiness %ill create and



(") W$y %ill you create t$ose lin,a&es:

11. &otential for growt J <ou are re'uired to state if your "usiness %ill &ro% and $o% %ill it&ro%. E.&. em!loyin& more mac$ineries

13. *o%ernment Regulations J Governments in any country $as re&ulations as it relates to t$esettin& u! and o!erations of a "usiness. <ou are re'uired state some re&ulations t$at are enforcedin your country as it relates to "usinesses. e.&. re'uire to !ay ta#es.

1. !tical +ssues J Et$ics $as to do %it$ ri&$t and %ron& &ood and "ad. <ou as t$eentre!reneur s$ould "e a%are of suc$ issues and its conse'uences. <ou are re'uired to list and "riefly e#!lain some of t$ose issues as it relates to your "usiness. E.&. Avoidin& of !oor la"elin&

1,. -ommunication of information in a logical wa" using correct *rammar.

<ou are re'uired to

(a) Write in future tense i.e. t$e event %ill occur sometime in t$e future

(") Correct s!ellin& !unctuation

(c) Su"*ect and ver" a&reement i.e. t$e ver" of t$e sentence must a&ree %it$ t$e su"*ect.

E.&. T$e do& is %al,in&. T$e su"*ect is do& and it is sin&ular (one) and as a result %ill ta,e asin&ular ver".

(d) emem"er t$is is a re!ort and s$ould "e %ritten in !ara&ra!$s.

T>E E2

0re!ared "y aymond Govinda

G@I2A 2ate !re!ared 1Ht$ ;uly 377H

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Marketin< 5art 2@ Market "tructures

Au&ust 3K 3717 at 5?H !m (0..B Lessons)

Market structures

o% %e %ill consider anot$er as!ect of mar,etin& J mar,et structures. We %ill start t$e to!ict$is %ee, and continue it ne#t %ee,.

efinition

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T$is refers to mar,et classification accordin& to t$e num"er of firms in t$e industry ty!es of !roduct t$e e#istence or non4e#istence of "arriers to entry and t$e level or de&ree ofcom!etition.

T$ere are four main mar,et structures

• 0erfect com!etition

• 8ono!oly

• 8ono!olistic com!etition

• li&o!oly

+or eac$ mar,et structure t$e candidate s$ould ,no% t$e follo%in&

• 2efinition

• C$aracteristics6features

• Advanta&es

• 2isadvanta&es

• S$ort4run and lon&4run !rofits

P 5erfect competition

efinition; 0erfect com!etition refers to a mar,et structure in %$ic$ t$ere are numerous firms int$e industry eac$ sellin& a $omo&eneous !roduct. T$ere are no real e#am!les of !erfectcom!etition in real life. >o%ever some mar,ets a!!roac$ near to !erfection. T$ese includea&ricultural mar,ets stoc, mar,ets and mar,ets for forei&n e#c$an&e.

#haracteristics; Some of t$e ,ey c$aracteristics of !erfect com!etition are

&umerous =uyers an: firms in the in:ustry; T$is means t$at neit$er one firm nor one "uyercan affect t$e !rice in t$e mar,et. Eac$ is a !rice4ta,er.

The pro:uct =ein< sol: is homo<eneous; T$is means t$at t$ere are no differences in %$at eac$firm is sellin& %$et$er real or ima&ined. T$us if a firm increases its !rice its sales %ill fall toero as t$e "uyers %ill "uy from t$e ot$er sellers %$o $ave e#actly t$e same !roduct.

5erfect kno*le:<e of the market; Bot$ "uyers and sellers ,no% e#actly %$at is $a!!enin& int$e mar,et. +or e#am!le if !rices c$an&e t$ey are immediately a%are of it.



5erfectly elastic :eman: cure; T$is indicates t$at t$e firms cannot control !rice "ut can sellany amount at t$e rulin& !rice.

Airms are in:epen:ent; T$is means t$at t$ey do not ta,e into consideration %$at t$e ot$erfirms in t$e industry do.

Bery hi<h leels of competition; Com!etition amon& firms is due to t$e fact t$at t$ere arenumerous firms sellin& e#actly t$e same !roduct eac$ com!etin& for t$e same consumerdemand.

&o a:ertisin<; Advertisin& is not necessary since every firm sells t$e same t$in&. In t$e s!aceof com!etitive and !ersuasive advertisin& t$ere may "e a small amount of informativeadvertisin&.

We %ill no% discuss t$e advanta&es and disadvanta&es of t$is mar,et structure even t$ou&$ int$e strictest sense t$is mar,et structure does not e#ist in reality. Bear in mind $o%ever t$at t$e

%$ole 'uestion of &ood and "ad is relative.

':anta<es of perfect competition

• All "uyers and sellers are treated e'ually.

• T$ere is only one !rice rulin& in t$e mar,et at a time and t$is !rice is not determined "y

any sin&le "uyer or seller "ut "y t$e mar,et forces of demand and su!!ly.

• Com!etition ,ee!s !rices lo%er t$an under ot$er mar,et structures.

• Since t$e !roduct is $omo&enous sellers do not $ave to s!end money on advertisin&.

• Com!etition "et%een firms also forces t$em to "e efficient.

• +irms under !erfect com!etition res!ond to c$an&es in consumer demand t$erefore t$e

consumer is said to "e soverei&n or ,in&.

isa:anta<es of perfect competition

• Lac, of variety "ecause an undifferentiated &ood is !roduced.

• T$ey may not "e a"le to afford t$e tec$nolo&y t$at allo%s t$em to "e efficient.

• T$e num"er of firms in t$e industry ma,es it im!ossi"le for t$em to "enefit from

collusion.

• T$ere may "e fre'uent c$an&es in !rice as t$e mar,et forces of demand and su!!ly

c$an&e.



Let us no% consider t$e !ossi"le !rofits t$at can "e earned in t$e s$ort run and in t$e lon& rununder !erfect com!etition.

"hort@run equili=rium

In t$e s$ort run some of t$e firms %ill earn normal !rofit some %ill earn su!ernormal !rofit andsome %ill earn su"normal !rofit.

ormal !rofit is t$at level of !rofit %$ic$ is *ust enou&$ to ,ee! a firm in t$e industry. nce t$eyare earnin& t$is level of !rofit t$ey %ill not leave t$e industry. In t$is situation avera&e revenue(A) is e'ual to avera&e cost (AC). T$is level of !rofit is often referred to as ero4economic !rofit.

If su!ernormal !rofits are "ein& earned t$is is so "ecause A is &reater t$an AC. W$en AC isa"ove A or A "elo% AC t$e firm is earnin& su"normal !rofit.

Consult an economics te#t"oo, to see $o% t$ese levels of !rofit are illustrated &ra!$ically.

on<@run equili=rium

In t$e lon& run all t$e firms under !erfect com!etition %ill "e in t$e situation %$ere t$ey areearnin& *ust normal !rofit AQAC.

;ust $o% did t$is come a"out:

In t$e lon& run all t$e firms t$at $ad "een earnin& su"normal !rofit in t$e s$ort run ARAC %illleave t$e industry and %ill &o into industries %$ere t$ey can at least earn normal !rofit.

W$en t$ese firms leave su!!ly %ill fall and !rices and !rofits %ill rise.

T$e firms t$at are earnin& su!ernormal !rofits AAC %ill attract ot$er firms into t$e industry "y t$eir attractive level of !rofits.

As firms enter su!!ly %ill increase and !rices and !rofits %ill fall. T$is rise and fall in !rofits%ill continue until all firms in t$e industry %ill "e earnin& normal !rofit AQAC.

W$en t$is occurs t$ere %ill "e no more incentives for firms to eit$er enter or leave t$e industry.T$us t$e industry %ill "e in lon&4run e'uili"rium. A&ain t$e &ra!$ical illustration of t$is

situation can "e found in most economics te#ts.

Well fol,s t$at is it for today. e#t %ee, %e %ill outline anot$er mar,et structure J mono!oly.

<ou can "e&in to read u! on t$is structure "ased on t$e $eadin&s I &ave you in last %ee,-s lesson.We %ill learn some interestin& facts a"out t$is mar,et structure and some common myt$s %ill "ee#!lained and dismissed. See you t$en.



P M%&%5%C

efinition an: e9amples of monopoly

A !ure mono!oly is a mar,et structure %$ere t$ere is only one firm in t$e industry t$erefore t$e

firm is t$e sole su!!lier of t$at &ood or service. >o%ever in t$e case %$ere a firm controlsa!!ro#imately 37 !er cent of a lar&e mar,et it is considered a virtual mono!oly.

E#am!les of mono!olies in ;amaica

• T$e ;amaica 0u"lic Service Com!any

• T$e ational Water Commission

#haracteristicsfeatures of monopoly

1. As indicated in t$e definition t$ere is only one firm in t$e industry. T$e im!ortance of t$is ist$at t$e demand curve for t$e firm-s &oods or services %ill "e relatively inelastic allo%in& t$emono!olist to e#ercise $is mono!olistic !o%er and restrict 'uantity causin& !rices to risesu"stantially. Consumers %ill eit$er $ave to !ay t$e $i&$er !rice or &o %it$out t$e &oods orservices alto&et$er.

3. T$ere are stron& "arriers to entry. A "arrier to entry is anyt$in& t$at !revents a firm fromenterin& an industry in t$e lon& run. Barriers to entry in t$is case %ould include t$in&s suc$ asle&al !rotection and &overnment restrictions. T$e im!ortance of stron& "arriers to entry is t$at int$e lon& run ne% firms %ill "e ,e!t out of t$e industry.

. 8ono!olies are !rice4ma,ers or fi#ers. Since t$ey face do%n%ard slo!in& demand curvest$ey can c$oose %$at !rice to c$ar&e. >o%ever t$ey are still constrained "y t$e demand curve int$at $avin& decided on !rice t$ey must allo% t$e demand curve to determine t$e 'uantity. A risein !rice %ill lo%er t$e 'uantity demanded.

5. T$e !roduct of t$e mono!olist is uni'ue t$erefore no close su"stitute for it is "ein& !roduced "y any ot$er firm.

?. T$e mono!olist may !rice discriminate t$at is c$ar&e !eo!le different !rices for t$e same&ood and6or c$ar&e different unit !rices for successive units "ou&$t "y a &iven "uyer. T$ose %$o !rice discriminate do so in order to earn increased !rofits.

"hort@run equili=rium

It is li,ely t$at t$e mono!olist %ill earn su!er4normal !rofits in t$e s$ort run. 8ono!oly does notnecessarily mean su!er4normal !rofits some mono!olies at t$eir !rofit4ma#imisin& out!ut facea situation %$ere avera&e cost is every%$ere a"ove avera&e revenue. T$us t$ey are earnin& su"4normal (less4t$an4normal) !rofits.



on<@run equili=rium

Since t$ere are stron& "arriers to entry it is li,ely t$at if t$e firm %ere earnin& su!er4normal !rofits in t$e s$ort run it %ould maintain or continue to earn su!er4normal !rofits in t$e lon&run.

If t$e firm $ad "een earnin& su"4normal !rofits in t$e s$ort run it %ould leave t$e industry in t$elon& run and &o into an industry %$ere it can earn at least normal !rofits.

Dome*ork

<our $ome%or, is t$e sim!le tas, of discussin& t$e advanta&es and disadvanta&es of t$emono!olistic mar,et structure. emem"er you can use economics te#ts to researc$ t$is area.

<ou %ill recall from our last lesson t$at in !ractice t$ere is no mar,et %$ic$ can "e classified as !erfectly com!etitive t$ou&$ I did &ive e#am!les of a mar,et a!!roac$in& near to !erfection.

W$ere !ure mono!oly is concerned t$ere are very fe% mar,ets t$at can "e classified as suc$ inreality. 8ost mar,ets t$erefore lie "et%een t$ese t%o e#tremes. In ot$er %ords most mar,etsare eit$er under mono!olistic com!etition or oli&o!oly.

P Monopolistic competition

T$is descri"es an im!erfect mar,et structure in %$ic$ t$ere are a relatively lar&e num"er of !roducers offerin& sli&$tly differentiated !roducts.

#haracteristicsfeatures of monopolistic competition

1. A relatively lar&e num"er of sellers. T$is ma,es t$e mar,et $i&$ly com!etitive. In additioneac$ firm-s mar,et s$are is small and collusion (comin& to&et$er to act as a mono!oly in order to&ain more !rofits) is difficult.

3. Inde!endence. Eac$ firm acts inde!endently of t$e ot$ers. T$at is no firm ta,es into accountt$e reaction of its rival firms.

. +reedom of entry into t$e mar,et and e#it out of t$e mar,et. In t$e lon& run firms %ill enterand leave t$e industry due to t$e lac, of si&nificant "arriers to entry.

5. T$e !roduct is differentiated. Eac$ individual seller $as a !roduct %$ic$ is sli&$tly different

from t$e !roduct of t$e ot$er !roducers. T$is !roduct differentiation is mainly t$rou&$ "randnames "ut can also "e t$rou&$ !$ysical and c$emical differences.

?. Advertisin& ta,es !lace. Eac$ seller see,s to increase "rand loyalty for $is6$er !roduct andt$ere"y increase !rofits.

D. +irms are !rice ma,ers6fi#ers. T$erefore t$eir demand curve is do%n%ard slo!in&. It is alsofairly elastic "ecause of t$e relatively lar&e num"er of firms in t$e industry.



E#am!les of mono!olistic com!etition in t$e Cari""ean $airdressers restaurants ta#i driversand &as stations.

"hort@run profits

T$e s$ort4run !rofits situation is similar to t$at of t$e !erfect com!etitor. It is !ossi"le to earnsu!ernormal !rofits. Su"normal and normal !rofits are also !ossi"le.

on<@run profits

In t$e lon& run t$e similarity "et%een !erfect com!etition and mono!olistic com!etition "ecomes more o"vious. T$rou&$ entry of ne% firms and e#it of some e#istin& firms !rofit %illtend to%ards normal in t$e lon& run for all t$e firms in t$e industry.

We move on no% to yet anot$er mar,et structure oli&o!oly.

%li<opoly

li&o!oly refers to a mar,et structure in %$ic$ a fe% firms dominate t$e industry in t$e senset$at "et%een t$em t$ey s$are a lar&e !ro!ortion of t$e industry-s out!ut. Some oli&o!oly firms !roduce virtually identical !roducts (for e#am!le metals c$emicals su&ar) and are ,no%n as !erfect oli&o!olies and some !roduce differentiated !roducts (for e#am!le cars soa! !o%derci&arettes electrical a!!liances) and are ,no%n as im!erfect oli&o!olies.

2uo!oly is a s!ecial form of oli&o!oly in %$ic$ t$ere are only t%o firms in t$e industry.

#haracteristics features of oli<opoly

1. T$ere are only a fe% firms in t$e industry. Wit$ only a fe% firms in t$e industry eac$ is "i&enou&$ to influence !rice. +irms are t$erefore !rice ma,ers6!rice fi#ers.

3. Interde!endence of firms. Since t$ere are only a fe% firms in t$e industry eac$ firm %ill $aveto ta,e into account t$e actions of rival firms in t$e industry for e#am!le if one airlineannounces discount fares &enerally all t$e ot$er airlines %ill try to matc$ t$e lo%er !rices.

. T$e !roduct is eit$er identical or differentiated. W$ere t$e !roduct is identical t$ere is noneed for advertisin& or non4!rice com!etition. >o%ever if t$e !roduct is differentiatedadvertisin& and non4!rice com!etition %ill ta,e !lace in order to ma,e consumers "elieve t$at

one "rand is "etter t$an t$e ot$er.

5. T$ere are "arriers to entry. T$ese "arriers may not "e as stron& as t$e "arriers for t$emono!olist $o%ever t$e effect is still t$e same. Barriers %ill ma,e it virtually im!ossi"le forot$ers to enter in t$e lon& run.

?. 0rices tend to "e sta"le. T$is is "ecause firms realise t$at decreases in !rice can lead to 9!rice%ars- and t$ey can end u! losin& so muc$ !rofit t$at t$ey are eventually driven out of t$e



industry. T$ey also ,no% t$at raisin& !rices %ill "e of no advanta&e to t$em since ot$ers %ill notco!y t$em.

D. +irms may "e collusive or non4collusive. W$en t$ey are collusive t$ey may for e#am!leformulate an a&reement to set !rices for everyone at a certain level.

K. li&o!olies may !rice discriminate in order to earn more !rofit.

5rofits in the short@run

Li,e t$e mono!olist many oli&o!olistic firms %ill earn su!ernormal !rofits in t$e s$ort run.

on< run

If t$e "arriers to entry are stron& su!ernormal !rofits %ill "e maintained. W$ere a firm isearnin& less4t$an4normal !rofits in t$e s$ort run it %ill leave t$e industry in t$e lon& run.

o% for your !ractice 'uestion

(a) 2efine 9mono!olistic com!etition- and 9oli&o!oly-.(3 marks)

(") Com!are t$e mar,et structures named in (a) a"ove under t$e follo%in& $eadin&s

(i) t$e num"er of firms in t$e industry

(ii) t$e e#istence or non4e#istence of "arriers to entry

(iii) ty!e of !roduct (4 marks)

(c) Give TW e#am!les of oli&o!oly industries and TW e#am!les of mono!olistic industriesin t$e Cari""ean. (3 marks)

(d) A mono!olistic firm is earnin& su!ernormal !rofits in t$e s$ort run.N W$at do youunderstand "y t$is statement: (2 marks)

(e) Assume t$at firms under mono!olistic com!etition and oli&o!oly are earnin& su!ernormal !rofits in t$e s$ort run

(i) >o% %ill t$eir lon&4run !rofits differ:

(ii) Give reasons for t$e differences in t$eir lon&4run !rofits. (3 marks)

Total marks; 20

T$is com!letes mar,et structures. I ur&e you to do some readin& on t$e to!ic. <ou %ill find someinterestin& facts if you consult te#ts in economics.



3 Comments

Marketin<

;uly 1 3717 at 1375 am (0..B Lessons)

Marketin<

It-s &ood to "e %it$ you all a&ain. T$is lesson "e&ins a ne% section of t$e sylla"us mar,etin&.We %ill distin&uis$ "et%een t$e terms mar,etin& and mar,et loo, at mar,etin& activities anddescri"e t$e mar,etin& mi#. T$e lesson %ill conclude %it$ a loo, at mar,et researc$.

hat is a marketE

A mar,et e#ists under any conditions %$ere "uyers and sellers are in contact directly orindirectly for t$e !ur!ose of e#c$an&in& &oods and services. T$e four elements of t$e mar,et are

"uyers sellers &oods and services and !rice. If any of t$e elements is removed t$en t$e mar,et%ill not e#ist.

T$e term mar,et is also used to descri"e t$e e#tent of t$e demand for a commodity. >ence alar&e mar,et means t$at t$ere is a lar&e demand for t$e &ood or service.

hat is marketin<E

8ar,etin& refers to t$e set of $uman activities and efforts %$ic$ is interrelated and focused on "rin&in& t$e &oods and services to t$e consumer. It $as to do %it$ &ettin& t$e ri&$t &oods to t$eri&$t !eo!le at t$e ri&$t !rice and at t$e ri&$t time in t$e most !rofita"le and efficient manner.

Marketin< actiities

T$ese include mar,et researc$ !ricin& !ac,a&in& "randin& sales !romotion advertisin& anddistri"ution.

The marketin< mi9

T$is refers to everyt$in& a firm can do to influence t$e demand for t$e !roduct. It is a collectiveterm t$at is used to refer to t$e %$ole ran&e of mar,etin& activities tec$ni'ues and strate&ies t$ata firm uses to reac$ its tar&et mar,et.

T$e varia"les of t$e mar,etin& mi# can easily "e remem"ered "y referrin& to t$e four 0s !roduct !rice !lace and !romotion.

• 0roduct J T$e &ood or service t$at t$e consumer %ants.

• 0rice J 0rofit is usually incor!orated in t$e !rice.

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• 0lace J 0roduct must reac$ t$e !lace %$ere t$e &ood or service is re'uired for

distri"ution.

• 0romotion J T$is refers to t$e %ays in %$ic$ consumers are made a%are of t$e

availa"ility of t$e !roduct or service and t$e 'ualities it $as. Advertisin& is t$e most

dynamic as!ect of !roduct !romotion.

Market research #oncept

T$e mar,etin& conce!t re'uires t$at a firm "e a%are of customers- needs to try to meet t$oseneeds and to attem!t to ma,e a !rofit in t$e !rocess.

8ar,et researc$ assists t$e firm to meet t$e &oal of t$e mar,etin& conce!t "y $el!in& t$e !rocessof findin& out %$at t$e consumer %ants.

8ar,et researc$ investi&ates %$at consumers are "uyin& or are li,ely to "uy in t$e future. It is

normally done "efore t$e advertisin& cam!ai&n. Sometimes it is carried out after t$e !roduct is%ell esta"lis$ed in order to assess and im!rove advertisin& and evaluate !roduct !erformance.

easons for con:uctin< market research

8ar,et researc$ %ill $el! in ma,in& decisions a"out

• %$ere to sell a &ood or service.

• $o% to sell it.

• consumer tastes J t$at is %$ic$ customers need t$e !roduct and e#actly %$at t$ey %antand %$at t$ey disli,e

• $o% to !rice t$e !roduct.

• $o% to !romote t$e !roduct.

• com!etition J %$o are t$e com!etitors in t$e mar,et !lace and %$at t$ey are doin&.

• %$at t$e sie of t$e mar,et is.

• consumer "e$aviour J $o% consumers %ill react to certain conditions or %$en faced %it$

certain factors.

In ot$er %ords mar,et researc$ $el!s us to see %$at influences t$e consumer.

efinition



8ar,et researc$ refers to a systematic a!!roac$ to collectin& information recordin& andanalysin& information collected and ado!tin& t$e information to t$e mar,etin& !lan of t$e "usiness.

Types

8ar,et researc$ includes t$e follo%in& ty!es of researc$

• Advertisin& or media researc$

T$is is researc$ to see t$e "est means of advertisin& at t$e lo%est cost. It can also "e done aftert$e advertisin& cam!ai&n to test $o% successful t$e cam!ai&n %as in terms of increasin& mar,ets$are.

• Business and economic researc$

T$is is done to study t$e trends in "usiness !rices and location of !lants and distri"ution centres.It also studies t$e c$an&in& economic conditions %$ic$ affect t$e "usiness.

• 0roduct researc$

T$is tests $o% consumers %ill acce!t ne% !roducts or c$an&es in e#istin& !roducts.

• 2istri"ution researc$

T$is is used to loo, at t$e effectiveness of t$e c$annels of distri"ution of t$e !roduct.

• 0ac,a&in& researc$

=sed to test t$e desi&n colour and ot$er !$ysical features of t$e !ac,a&e

• Sales researc$

T$is tests t$e !otential sie and ma,e4u! of t$e tar&et mar,et in terms of a&e se# income etc.

• Consumer researc$

=sed to find out %$y consumers !refer some &oods and services to ot$ers and to researc$ t$esie of t$e mar,et. It also involves researc$ to see if t$ere are any c$an&es in !eo!le-s incomestastes or "rand loyalty.

T$at-s it for today. Oee! safe until ne#t %ee, %$en I %ill continue %it$ to!ics related tomar,etin&. Bye for no%.

Aactors that !nfluence #onsumer >ehaiour



• 5rice

Consumers %ill ad*ust t$eir demand for !articular &oods and services as t$e !rices oft$em c$an&e. Generally s!ea,in& t$e lo%er t$e !rice t$e &reater t$e 'uantity demanded.

• 5rice of su=stitutes

If t$e !rice of su"stitutes is lo%er t$en consumers %ill s%itc$ from t$e relatively dearer&oods and services to t$e relatively c$ea!er &oods and services.

• Quality

Consumers %ill &ravitate to%ards t$e "etter 'uality !roducts and may even "e %illin& to !ay more for t$em.

• Taste

0eo!le differ in t$eir !references for &oods and services so t$e mar,eter $as to identifyt$ese !references.

• Tra:ition

Lon&4standin& traditions and customs may influence demand. +or e#am!le some$ouse$olds !urc$ase Grace !roducts "ecause t$eir mot$ers and &randmot$ers !urc$asedt$is "rand and t$ey see no reason to sto!.

• !ncomeaffor:a=ility

T$e amount of money earned affects one-s a"ility to !urc$ase &oods and servicest$erefore some $i&$ly !riced &oods and services %ill only "e !urc$ased "y t$e $i&$er4 !aid %a&e earners.

• "pen:in< patterns

Some consumers are accustomed to s!endin& a certain amount of money. If !rices fallt$ey may not s!end any on t$ose &oods and services "ecause t$ey $ave alreadyesta"lis$ed a !attern of s!endin& %$ic$ t$ey are not %illin& to c$an&e.

• >ran: loyalty

8ar,eters often try to create loyalty for t$eir !roducts amon& consumers. T$e $o!e is t$att$e customer %ill stay %it$ t$eir e#istin& !roduct "ecause it $as satisfied t$em forsometime.

Customers %$o are loyal to certain "rands cannot "e easily %ooed or enticed a%ay from t$ese

!roducts since t$ey are satisfied %it$ t$em.

1 Comment

Mana<ement information systems

;une 31 3717 at 1? am (0..B Lessons)

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Today, we are looking at the concept of management information systems (MIS) inorganisations and the benefits and challenges in using these systems.

At this point, it would be good for us to eamine the terms, data and information. !atarefers to raw facts, while information refers to processed data. "or eample, #, $, % and &

may be considered as data or raw facts and, as such, ha'e 'ery little, if any, meaning.

owe'er, if we process these figures by, say, a'eraging them, we will arri'e at . Thea'erage has much more meaning and is, therefore, more useful to us.

In the past, managers spent days, e'en months, waiting for data to be processed intoinformation in order to make important decisions. This has changed in recent times because

of the a'ailability of information systems.

MIS refers to any computer*based system that pro'ides timely and accurate information formanagers to use in the decision making and management of an organisation.

Benefits of MIS

+. Time, money and labour are sa'ed. Since the computer is used, the time spent in o'eralldecision making to the actual proect completion is normally reduced. It is often said thattime is money, so, if time is sa'ed, money is also sa'ed.

Additionally, labour costs are sa'ed because routine tasks which would, in the past, be done

manually are now done by the computer. -ess labour is, therefore, employed, reducingwages to labour.

#. Impro'ement in production and marketing techniues and profit margins. MIS pro'ides

information that will ultimately lead to ualitati'e and uantitati'e impro'ements inproduction, as well as pro'ide informa*tion which will allow for impro'ements in marketing

techniues, such as ad'ertising and sales promotions. /roduction and marketing

impro'ements will, most likely, transfer into increased profits margins.

0. Increased competiti'eness. MIS enables managers to access information on theircompetitors. They can study their competitor1s techniues with the aim of doing better than

they do.

$. -ess likelihood of errors being made. The reason is that it is a computer*based system

which tends to be accurate.

. It allows for decisions to be made at all le'els in the business. !ecisions can be made by

top, le'el and lower*le'el managers. It is also useful for other employees in theorganisation.

%. 2ommunication within the organisation is impro'ed. This is so since the information is,most of the time, clear and accurate 3 two elements of good communication.

4. Managers are assisted in carrying out their management functions, for eample,planning, controlling and directing. It also impro'es the efficiency of the functional

managers within the organisation.

Challenges of MIS



+. The cost of setting up and maintaining MIS. Since the system in'ol'es the purchasing ofcostly computers, the maintaining of these computers and the cost of security systems, the

capital outlay is 'ery high and could initially be a hindrance to its use in organisations.

#. The high cost of training. Managers must be trained to use the systems. Therefore, the

o'erall cost of human resource de'elopment increases.

0. uman error. uman error can affect the efficiency of the system. This means that

human error can result in problems which can cause time to be lost and, e'en*tually, cause

profits to fall.

$. 5ften, too much information is supplied. Too much information can be ust as harmful astoo little.

. Sometimes, information is not timely. This means that it is not always on hand when it isneeded and information that is pro'ided too late cannot be utilised effecti'ely.

Homework

6ow you can work on this essay*type uestion.

(a) 7hat is a management information system8 (2 marks)

(b) -ist two groups in an organisation that benefit from MIS. (2 marks)

(c) 9plain four reasons why MIS is 'aluable in an organisation. (8 marks)

(d) !iscuss four challenges of a MIS. (8 marks)

1 Comment

ole of <oernment

A!ril 7 3717 at 3?K am (0..B Lessons)

Forms of government assistance to businesses

5ne of the roles of go'ernment is to assist businesses. In doing so, these businesses will be

able to epand and produce more. As they produce more and accumulate a surplus, thisecess or surplus can be eported and earn foreign echange, which will in turn benefit the

country as they will be better able to pay for their imports and, perhaps, ha'e a surplus togo towards the economic growth and de'elopment of the country. :o'ernments assist in a

number of ways.

+. They lend some businesses money;capital. This is especially true if the business is asmall one. :o'ernment institutions for lending include the Small <usiness Association of

=amaica, MI!AS (Micro In'estment !e'elopment Agency) and =amaica Trade and In'est(formerly =AM/>5). These loans are usually at low rates of interest and, therefore, are

cheaper than elsewhere.

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#. They are in'ol'ed in training and technical assistance. "or eample, they ha'e9A>T;Trust 6TA and the 6ational ?outh Ser'ice.

0. :o'ernments set up research and information centres to assist businesses in gettingaccurate and timely information that may benefit them. "or eample, the Statistical

Institute of =amaica (STATI6) and the =amaica Information Ser'ice.

$. :o'ernments also gi'e subsidies and grants to businesses, which helps them to cut the

costs of production and, ultimately, to produce more. Subsidies can be in the form of money

or materials, while a grant is a monetary gift that does not ha'e to be repaid.

. "or businesses that ha'e ust been set up, go'ernments may grant ta concessions untilthey can stand firmly on their own two feet.

he im!act of social services !rovi"e" b# government

A large proportion of go'ernment re'enue is used to pro'ide social ser'ices for the country.

These social ser'ices ha'e a positi'e impact on the country, in that the welfare or well*being

of indi'iduals, families and businesses is impro'ed. Social ser'ices are usually grantedaccording to the need, that is, to low*income families and families with persistentdifficulties. These ser'ices are often regarded as merit goods and result in reducing the

ineualities between the rich and the poor. In welfare states such as Sweden, there is noetreme po'erty. -et us consider some specific social ser'ices and the positi'e impact that

they may ha'e.

(a) :o'ernment health care. This results in a larger portion of the population being healthy

as a result of general health, dental, optical and medical care. These are pro'ided throughgo'ernment clinics and hospitals. A healthy population means a healthy future labour supply

and, ultimately, increased efficiency and increased production.

(b) 6ational insurance scheme. 5ne positi'e effect is the pro'ision of pensions and securityfor the elderly. There are also widow1s benefits, funeral grants and assistance gi'en in casesof loss of earnings through illness. All of these benefits help to maintain the standard of

li'ing of people and pre'ent them from falling into a state of po'erty.

(c) 9ducation. :o'ernment pro'ides public schools and assists them through ministry

grants. The result is that a greater portion of the population becomes informed and literatethan if education was entirely through pri'ate means. More persons will be able to get obs

through being educated and this will reduce the unemployment rate.

(d) >oads and transportation. Impro'ed roads and transportation by go'ernment will mean

greater access to goods and ser'ices. :reater access means greater standard of li'ing forpersons on a whole.

$uestions%

+. (a) !efine the term go'ernment. (2 marks)

(b) 5utline T>99 responsibilities of go'ernments in your economy. (& marks)



(c) !iscuss the functions of T>99 go'ernment agencies in'ol'ed in the protection of theen'ironment. (& marks)

(d) 9plain T>99 ways in which the go'ernment may regulate business acti'ity in yourcountry. (& marks)

otal marks% 2'

#. (a) !istinguish between the terms ta and taation. ( marks)

(b) !iscuss T>99 purposes of taation (& marks)

(c) !istinguish between a proportional ta and a regressi'e ta. ( marks)

(d) !efine direct taes and indirect taes. ( marks)

(e) :i'e 569 eample of 9A2 type of ta named in (d) abo'e. (2 marks)

otal marks 2'

3 Comments

"ocial accountin< an: <lo=al tra:e 1

A!ril 7 3717 at 3 am (0..B Lessons)

Stan"ar" of living

Stan"ar" of living refers to the level of living which a !erson famil# or wholenation maintains in terms of the various amounts of an" kin"s of goo"s an"

services consume"* Stan"ar" of living varies from !erson to !erson famil# tofamil# an" nation to nation* It also varies over time* he national stan"ar" of

living means the average stan"ar" of living of all the !ersons living in thatcountr#*

$ualit# of life looks at the e+tent to which a !erson famil# or nation en,o#s thebenefits of its wealth* - countr# ma# have a high stan"ar" of living in terms of

being able to !rovi"e man# goo"s an" services for its !eo!le but the .ualit# of lifema# be low if the !eo!le are not able to access the wealth !rovi"e"*

Factors in"icating stan"ar" of living of a countr#

(wealth of a countr#)

• he level of consum!tion of goo"s an" services* /enerall# s!eaking the

greater the amount of goo"s an" services consume" the higher will be the

stan"ar" of living* he counter argument to this is that the .ualit# of thegoo"s an" services ma# have "eteriorate" while the level of consum!tion

increase"* he .uestion therefore woul" be "i" the stan"ar" of livingreall# increase0

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• -verage "is!osable income of the !o!ulation* 1is!osable income refers to

net income the amount of mone# that is available to be use" as one woul"

like to* In economics "is!osable income is either s!ent on consum!tiongoo"s an" services or save"* -s far as stan"ar" of living is concerne" the

higher the average "is!osable income of the !o!ulation the higher will bethe stan"ar" of living* he counter argument here is that the "is!osable

income ma# be high but if it is une.uall# "istribute" man# !eo!le ma#have a low stan"ar" of living*

• he level of national ownershi! of ca!ital e.ui!ment* -s a countr# increases

its ownershi! of ca!ital e.ui!ment it is able to !ro"uce more goo"s an"

services an" thereb# increase its stan"ar" of living* However this meansthat the# will first have to save or re"uce consum!tion in or"er to

accumulate this ca!ital* 1uring this time the stan"ar" of living ma# actuall#

fall*

• -ccess to mo"ern technolog#* Mo"ern technolog# enables a countr# to

!ro"uce more an" to !ro"uce more efficientl# thereb# increasing stan"ar"of living* However for "evelo!ing countries like amaica the cost an"

maintenance of mo"ern technolog# is high which often results in loss of

,obs* his in turn means a lower stan"ar" of living*

• he level of investment in research an" technolog#* he more a countr#

s!en"s mone# in research an" technolog# the greater will be itsim!rovements in the level an" .ualit# of goo"s an" services an" then the

greater will be the stan"ar" of living* -gain however cost becomes a"ominant factor as research an" technolog# can be ver# costl#*

In"icators of a countr#3s .ualit# of life

$ualit# of life refers to the e+tent to which the countr# en,o#s the benefits of its

wealth* he factors that affect this inclu"e%

• he e+tent of securit# en,o#e"* he greater the level of securit# en,o#e" b#

the citi4ens the greater will be the .ualit# of life* High levels of crime can!revent citi4ens from accessing the wealth that will increase their .ualit# of

life*

• he availabilit# of health e"ucational an" recreational facilities* /reater

access to these will surel# increase the .ualit# of life* -ccess however ma#be "e!en"ent on abilit# to !a#* /overnments can increase a nation3s access

to these areas b# subsi"ising the cost or b# !rovi"ing them free of cost*

• 1iet an" nutrition* he amount of foo" an" "rink is not the im!ortant thing

as far as .ualit# of life is concerne"* If !eo!le are not having balance"

meals then their "iet an" nutrition will be !oor an" the .ualit# of life willfall even if the# are consuming more*



• 5ife e+!ectanc#* his refers to the average number of #ears a !erson is

e+!ecte" to live* If !eo!le are e+!ecte" to live longer than before it will

mean that the .ualit# of life has in fact increase"*

• he rate of infant mortalit#* Infant mortalit# refers to "eath among infants*

If a countr# is e+!eriencing re"uce" "eath rates among infants then their.ualit# of life woul" be sai" to have increase"* his coul" be because of

im!rove" research in health an" im!rove" health or greater access to healthcare*

• -ccess to !ublic utilities* he greater the access to !ublic utilities such as

electricit# an" !ortable water the greater will be the .ualit# of life* If onl# a

few !ersons in a countr# have access to these utilities then generall#s!eaking the .ualit# of life will be ver# low*

he "istinction between economic growth an" "evelo!ment

6conomic growth is a .uantitative conce!t7 that is it "eals with numbers orfigures or amounts* It refers to the real growth in or e+!ansion in national out!utan" is most often measure" in terms of real /ross 1omestic ro"uct (/1)*

he conce!t of economic growth is !ositive* his means it alwa#s refers to anincrease in out!ut* 9egative growth while .uantitative as is economic growth

refers to a "ecrease in the national out!ut*

he !ro"uction !ossibilities frontier can be use" to illustrate economic growth* -

!ro"uction !ossibilities curve is a curve showing all the !ossible combinations oftwo goo"s that can be !ro"uce" using u! all the resources an" at a given state of

technolog#* :hen economic growth takes !lace the !ro"uction !ossibilities curve

shifts to the right* he curve ma# shift to the right an" economic growth results ifthe !ro"uctivit# of labour or other factors of !ro"uction im!rove7 if there is an

im!rovement in technolog#7 or if there is an increase in resources*

r# to fin" a "iagram of a !ro"uction !ossibilities curve* Co!# it into #ournotebooks then shift the curve to the right* he first curve re!resents !ro"uction

!ossibilities for the countr# 9;: an" the secon" one will re!resent the!ro"uction !ossibilities at a future "ate for e+am!le five #ears later*

6conomic "evelo!ment is .ualitative an" refers to the !rocess b# which thestan"ar" of living an" the well<being of the entire nation are im!rove" b# raising

real !er ca!ita income* 6conomic well<being is concerne" with the .ualit# ofhousing clothing e"ucation foo" health !eace of min" securit# era"ication of

!overt# an" era"ication of ine.ualities in income an" wealth an" so on* If an# ofthese factors increases or im!roves there will be economic "evelo!ment*

Human resource "evelo!ment looks at im!roving the human resources of labour

an" entre!reneurshi!* Im!rovement of labour an" the entre!reneur means thatthe !ro"uctivit# of both will increase* In turn there will likel# be an increase in

economic growth an" "evelo!ment*



he human resource can be im!rove" through e"ucation training or retrainingim!rove" health facilities im!rove" working con"itions an" an im!rovement in

the factors of !ro"uction that the# have to work with*

he role of e"ucation in economic growth an" "evelo!ment

Im!rove" e"ucation an" training means that labour an" entre!reneurshi! will nowhave greater ca!acit# to increase the national out!ut an" im!rove the well<being

of the nation* hrough e"ucation an" training labourers ma# learn new an" moreefficient metho"s of !ro"uction an" thereb# increase the overall out!ut* he

entre!reneur might learn how to better organise an" bear risks thereb# causingim!rove" out!ut an" im!rove" economic well<being* 6"ucation thus im!roves

the !ro"uctivit# an" efficienc# of both of the human factors*

9ow for #our homework%

(a) 1istinguish between economic growth an" economic "evelo!ment (& marks)

(b) :h# is economic growth regar"e" as a .uantitative conce!t while economic"evelo!ment is regar"e" as a .ualitative conce!t0 ( marks)

(c) 1iscuss :; factors that might result in economic growth an" :; factors

that might result in economic "evelo!ment (8 marks)

(") 6+!lain ;96 wa# in which e"ucation can cause economic growth an"

"evelo!ment (2 marks)

otal marks% 2'

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>alance of payments (continue:)

A!ril 7 3717 at 33H am (0..B Lessons)

H6 B-5-9C6 ;F -=M69S M>S B-5-9C6

@ltimately, the balance of payments must balance since e'ery eport becomes an import

and e'ery import an eport. <alancing the balance of payments means that there mustneither be a surplus nor a deficit in the end. A way must be found to finance the surplus or

deficit through eternal strategies which are shown in the official financing account.

(a) !efine the term balance of payments.

(a) 7hat is meant by a country1s balance of trade8

(b) 2alculate the <A-A629 5" T>A!9 for the country

shown below

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Bisible trade @S (C M)

9ports #%,DDD

Imports #E,DDD

In'isible (net)

9ports #D,DDDImports +,DDD

(d) 6ame T75 items that are regarded as in'isibles.

(e) 2alculate the current account balance.

H6 ;FFICI-5 FI9-9CI9/ -CC;>9

This account shows how the balance of payments is financedF that is, it shows what is donewith the surplus or the deficit on the balance of payments. -et us look at some ways of

financing a balance of payments deficit.

FI9-9CI9/ - B-5-9C6 ;F -=M69S 16FICI

• borrowing from international financial institutions like the International Monetary

"und and the 7orld <ank

• borrowing locally

• drawing down on the official reser'es of foreign echange

• selling an asset locally or o'erseas

• borrowing from other countries

• recei'ing gifts and grants

• rescheduling of the debt

• Importing on credit. /ermission must be granted from the eporting country.

7hat if the balance of payments showed a surplus8 This surplus could be financed or used

in the following ways.

FI9-9CI9/ - B-5-9C6 ;F -=M69S S>?5>S

• lend money, for eample to other countries

• purchase an asset locally or o'erseas



• increase the official reser'es of foreign echange

• pay outstanding debts

• in'est the surplus

• gi'e gifts and grants to other countries

<elow is an eample of the official financing account. Assume that the balance of paymentsfigure is @SC+,DDm.

H6 ;FFICI-5 FI9-9CI9/ -CC;>9

@S CM

"oreign currency borrowing G&DD

5fficial reser'es G4DD

Total G+DD

6ow we ha'e balanced the balance of payments by eliminating the deficit of @S C+,DDm.

7hat if a country continues to ha'e an ad'erse balance of payments, year after year8 7ell,

that country must find ways of correcting that ad'erse balance of payments. The countryhas a balance of payments problem and must, therefore, earn more by increasing eports

through

• offering incenti'es and subsidies to local manufacturers

• encouraging foreign in'estment

• etending credit facilities

• reducing spending

• impro'ing marketing skills and sponsoring ehibitions

• de'aluing the local currency, which makes eports cheaper

>educing imports by

• increasing tariffs (duties) on imported goods and ser'ices

• setting uotas to limit the physical amount imported

• reuiring special licences to import



• de'aluation, which makes imports dearer

• foreign*echange controls, which limit the amount of foreign currency a'ailable to

indi'iduals

The uestions below will test how much you ha'e grasped of this lessons.

(a) 7hat is the official financing account8 (2 marks)

(b)(+) -ist T75 ways of financing a balance of payments surplus (2 marks)

(++) -ist T75 ways of financing a balance of payments deficit (2 marks)

(c) A country has a balance of payments of @SC G 0DDm, draw up the official financing

account to show how this may be financed (2 marks)

(d) 9plain T75 ways of correcting an ad'erse balance of payments.

otal% @' marks

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!nternational tra:e an: =alance of payments

A!ril 7 3717 at 33D am (0..B Lessons)

International tra"e

7hen countries buy goods and ser'ices from each other and;or sell goods and ser'ices toeach other, this is referred to as international trade. International trade is thus trade among

countries.

International trade is the largest scale in the de'elopment of di'ision of labour and

specialisation, wherein countries specialise in the goods and ser'ices that they can producebest and at the lowest cost, and then trade with other countries to get the goods and

ser'ices that they do not specialise in. owe'er, you may ask, why did international trade

de'elop8 -et us consider the reasons for international trade.

?6-S;9S F;? I96?9-I;9-5 ?-16

+. 2limate and soil type differences. 6ot all countries ha'e the same climate and soilconditions. !ifferent crops will grow where the climate and soil types differ.

#. 6atural resources. These can only be mined where they are found, for eample, bauite.

Some countries are rich in mineral resourcesF others ha'e little or none at all.

0. Special skills of the labour force. The type of labour determines what is produced. "or

eample, "rance produces fashions (clothes), cologne and 'arious types of cheese because

the labour force has special skills and aptitude in these areas.

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$. -ack of uantity and uality of local goods. Bery often, countries import goods andser'ices because what they produce locally is not enough for local needs and;or because the

uality falls short of what is desirable.

. Increased transportation and communication. These ha'e made trading on a worldwide

scale much easier.

%. Access to a wider 'ariety of goods and ser'ices. 7ider 'ariety pleases consumers and

results in an increase in their standard of li'ing. The same is true for countries.

4. "oreign echange. This is gained from eports and is used to pay for imports.

&. 7orld output increases. This allows the problem of scarcity to be reduced

E. 2heaper goods and ser'ices. 2ountries may import goods and ser'ices because they are

cheaper than goods and ser'ices sold locally.

Balance of !a#ments

International trade refers to trade among different countries of the world. 7hen countries

trade with each other, a record is kept of the financial transactions between them. This

record is known as the balance of payments. It is a statement of the trade which takes placebetween a country1s residents (indi'iduals, businesses and the go'ernment) and the

residents of all foreign countries. Therefore, =amaica1s balance of payments shows all thepayments we recei'e from other countries and all payments which we make to them.

There are three components of the balance of payments account, the current account, thecapital account and the official financing account. 6ow we are going to look at each account

in turn. /lease note that in all parts of the balance of payments account, eports andincome are gi'en a plus (G) sign and imports and payments are gi'en a minus (*) sign.

H6 C>??69 -CC;>9

This section of the balance of payments is di'ided into T75 parts /art (a) the 'isible trade

account and part (b) the in'isible trade account.

The 'isible trade account records the tangible items 3 the imports and eports of goods

only. The difference between the money 'alue of goods imported and goods eported isknown as the 'isible trade balance or the balance of trade. This balance may be a plus (G)

surplus or a minus (*) deficit. If eports eceed imports, the result will be a surplus or afa'ourable balance of trade. 5n the other hand, if imports eceed eports, there will be a

deficit or unfa'ourable balance of trade.

The in'isible trade account records the intangible items 3 the imports and eports of

ser'ices, tourist ependiture and income, income from in'estments abroad and paid toin'estments abroad. The ser'ices include shipping, a'iation and financial ser'ices. The

balance on this account is known as the in'isible balance and it will be a plus (G) fa'ourableif eports (income) of the intangible items eceed the imports. 6ow you can work out for

yoursel'es what will result in a minus (*) on this account.



The o'erall current account balance is the difference between our eports of goods andser'ices and the imports of goods and ser'ices. As with the 'isible and in'isible balances,

the o'erall current balance may be fa'ourable or unfa'ourable.

H6 C-I-5 -CC;>9

This account records capital flows 3 loans and grants to and from other countries andin'estments bought and sold. (6ote that the income from in'estments is recorded in the

in'isibles of the current account). As with the current account balance, the capital account

balance may be fa'ourable or unfa'ourable.

6ow we need to consider the o'erall balance of payments figure. This takes into account thecurrent account balance and the capital account balance. If, o'erall, the eports eceed the

imports, the o'erall balance of payments will be a surplus (G) and if, o'erall, the importseceed the eports, the o'erall balance will be a deficit (*). This means that the country

spent more than it earned.

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The small firm ? 5art 2

;anuary 15 3717 at 33? am (0..B Lessons)

>ello a&ain. 2o you remem"er last %ee,-s lesson: I $o!e so. It dealt %it$ definitions ande#am!les of t$e small firm c$aracteristics of t$e small firm and t$e role of t$e small firm inCari""ean Communities. T$is %ee, %e %ill concentrate on t$e reasons %$y many firms remainsmall and t$e advanta&es and disadvanta&es of t$e small firms.Cari""ean &overnments reco&nise t$e im!ortance of small firms and try to encoura&e t$eir

e#istence "y c$ar&in& t$em less ta# or e#em!tin& from certain ta#es. In some instances loans aremade availa"le to small firms at s!ecial rates of interest. In ;amaica t$ere is t$e SmallBusinesses Association of ;amaica (SBA;) t$at assists small "usinesses in t$e country includin&lendin& t$em money at lo% rates of interest. But %$y do firms remain small:easons for remainin& smallU To ,ee! t$e "usiness in t$e family. E#!ansion may re'uire $irin& !ersons outside of t$e family.U 8ar,et for t$e &ood or service is small. =nless t$e mar,et &ro%s t$e firm %ill remain small.U Some firms are lin,a&es to small4 and medium4sie "usinesses. =nless t$ey e#!and t$ese firms%ill remain small.U Some firms remain small "ecause t$ey $ave missed t$e o!!ortunities to e#!and.U 8any firms $ave not &one into lar&e4scale !roduction "ecause t$ey do not $ave t$e necessarycollateral to access loans for e#!ansion.U T$e o%ners of some small firms do not $ave t$e necessary mana&ement and6or tec$nical s,illsneeded for a lar&er "usiness.U +or many firms t$e most efficient sie is t$e small firm.Advanta&es of small firms1. T$ese "usinesses are often strate&ically !laced t$at is t$ey are located in !laces t$at areconvenient for customers.3. T$ey !rovide &oods and services t$at are not !rovided "y lar&er firms.

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. T$ey normally sell a variety of &oods and services and t$e items sold are usually uni'ue andcustomers !refer t$is to t$e standardisation of lar&er firms.5. 0eo!le su!!ort small firms "ecause o!erators of t$ese firms ,no% t$eir customers %ell andoften offer t$em credit.?. T$e small firm is more efficient %$ere !ersonal services are to "e carried out.

D. T$e to! mana&er is t$e sole decision4ma,er. >e6s$e can t$erefore ma,e decisions 'uic,ly and,no%s e#actly %$at is &oin& on.K. Small firms $ave a small num"er of staff t$erefore staff !ro"lems can "e more easily detectedand dealt %it$ t$an in lar&er firms.. T$ere is clear communication amon& em!loyees and it is easier for mana&ement to $ave a&ood relations$i! %it$ em!loyees since t$e "usiness is small.H. Because small firms offer certain services lar&e firms are !revented from "ecomin& too lar&e.17. Small firms stay o!en for lon&er $ours t$an lar&er firms to t$eir advanta&e.11. T$ey are easy to start u! and often receive &overnment assistance.13. T$ese firms "enefit from assistance from small "usiness associations for e#am!le t$e SBA;.T$e disadvanta&es of small firms

1. %ners $ave to !ut in lon& $ours sometimes %it$out $olidays in order to ma,e t$e "usiness asuccess.3. 8any of t$ese "usinesses $ave limited lia"ility t$at is t$ey may loose more t$an t$ey $aveinvested in t$e "usiness if it s$ould fail.. T$e mana&er is often "o&&ed do%n "y ot$er tas,s %$ic$ in lar&er "usinesses are dele&ated toassistant mana&ers and su!ervisors.5. T$ey suffer "ecause of com!etition from lar&er firms. T$is is so since t$e sim!le c$ea!mac$inery used in small firms may not allo% t$em to com!ete e'ually %it$ lar&er firms.?. 0rices tend to "e $i&$er t$an t$ose of lar&er firms.D. Small firms are vulnera"le to c$an&es in t$e economy t$ey are easily affected "y t$e 9u!s- and9do%ns- in t$e economy.K. T$ey $ave difficulty in arran&in& loan financin& since financial institutions are often reluctantto lend t$em money. W$en t$ey do lend t$em money t$e rate of interest is often $i&$er and t$eloan amount is smaller t$an t$at of lar&er firms.As usual I %ill end %it$ your $ome%or,.(a) 2efine a small firm. (3 mar,s)(") List T>EE c$aracteristics of a small firm. ( mar,s)(c) (i) E#!lain += im!ortant roles of small "usinesses in your local community. (5 mar,s)(ii) 2iscuss TW advanta&es and TW disadvanta&es of small firms. ( mar,s)(d) State T>EE reasons %$y many firms remain small. ( mar,s)TTAL 37 8AOS


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