Business Economics Ppaer (Article Sample)

BUSINESS ECONOMICS
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Table of ContentsIntroduction………………………………………………………………………………………..31.0 Effects of changes in the economic environment on a selected business……………………..42.0 The effects of Government policies on the Business………………………………………….53.0 The impact of government spending on a selected business………………………………….64.0 Analysis of the implications of government policies.................................................................6 5.0 Evaluation of the impact of changes in the economic environment..........................................76.0 Effects of fiscal and monitory policy decisions……………………………………………….87.0 Analysis of the effects of fiscal and monetary policies……………………………………….98.0 Elements of fiscal and monetary policies……………………………………………………109.0 The impact of international factors on business……………………………………………..1110. The impact of changes in the global and European business environment………………….13Conclusion……………………………………………………………………………………….13References………………………………………………………………………………………..14
Introduction
This report involves the economic analysis of how Wimpey Homes is affected by changes in economic environment, Government policies and the changes in global and European business environment. Wimpey Homes is a business organization which involves in activities such as building houses for sale. It is affected by different economic factors which ensure that it experienced growth or a decline in its economic activities.
1.0Effects of changes in the economic environment of Wimpey Homes
OUTPUT
SLUMPBOOM
RECEESION
RECORVERY
There are four economic environmental changes which affect this company. They include depression, recession, recovery and boom. At slump this company makes a constant profit as there economic condition doe not change. The graph above indicates the business cycle where at slump there is a reduction in the production capacity due to reduction in the quantity of goods and services demanded. This is because there are less people who are willing and able to buy the products of this company or due to increase in competition. For the sake of this company, it would be because many people are building rental houses. This may make this company not to build more houses since there will few people who will use our houses for rental purpose. Recession is the business cycle where there is a decline in sales level as compared to the base year. Wimpey Homes makes less sales revenues due to decrease in demand in its houses. The reduction in the demand for houses also has led to a decline in the quantity of houses that it sells to people. At this point there is high cost of labor, cost of building materials and other operating expenses in relation to a reduction in sales revenues. This reduces the profitability of this company and makes the stakeholders such as investors to get fewer returns on their investment. This condition also makes this company to lose confidence and therefore reduce their investment decision. This condition also affects the ability of this company to save and invest and this has a negative effect on the growth and expansion of this business organization. Recovery is a period in the business cycle where the business is between recession and boom. It is a point where the business starts to pick up from low sales level. At this point the cost of labor also starts to reduce and that materials. Due to this company starts to make reasonable profit. This economic condition influences faster growth rate and the level of employment is also high and therefore this company is able to produce its products at a lower cost and sell at a high price. Boom is the point where the economy is growing at a fester rate. The employment is also very high and unemployment is as low as zero. The confidence of this business increases to the extent that it can even start producing luxury goods. At this point this company is able to build houses at a low cost and also pay low labor cost. Through this it will be able to make high profits and also able to invest and save part of its income.
2.0The effects of Government policies on the Business
Government policies have a number of effects on the business of Wimpey Homes (Blinder, 2008). The policies which greatly affect this business include fiscal and monetary policies. The changes in these policies are able and capable to affects its business operations negatively of positively depending on the nature of the change. When the government imposes more tax on foreign companies building houses in UK, there will be high demand for houses. This will make Wimpey Homes to have high sales volumes for its houses (Keat & Young, 2006). This will increase its sales revenues and also make it able to meet its demands. When there is an overall imposition of tax on all houses, there will be a reduction in sales revenues as the cost of building will be high and as a result few people will afford house built by this company. Change in Government spending policies also has an impact on the business activities for this company. When there is an increase in taxation to promote public development. This increases the spending of the government (Mcwdn.org, 2009). This discourages investment of the business as it reduces the amount of money that this company may use to invest due to high taxation. The Government policy may also cause an increase or decrease in interest rates. When there is a government policy that influences the increase in interest rates, it will make Wimpey Homes to pay high cost of borrowing (Mcwdn.org, 2009). This may reduce the number of house that this company completes per year due to financial crisis. This therefore reduces its profitability and the production capacity. The increase in interest rates also has a negative effect on the disposable income of customers. This is reflected in the business as they will not have money to spend when buying a house.
3.0 The impact of government spending on Wimpey Homes
Government spending also has a number of effects on this company. Government spending is likely to make the economy of a country to shrink and this has a negative effect on the income of people and the company. Since government spending require high taxation which reduces the company profits (Mcwdn.org, 2009). The reduction in profitability also prevents the company from saving and investing since it reduces the company income. When there is a reduction in Government spending, there is a reduction in taxation which increases the ability of this company to save money and invest. It will therefore have sufficient amount that it can distribute to shareholders as dividends and remain with sufficient amount as retained earnings (Sosin, 2007). Through this will be able to promote growth and expansion of the business. Government spending is also able to promote the production of domestic goods. This is because it reduces the amount of tax that the company pays. This company will pay less tax when there is a reduction in government spending (Keat & Young, 2006). It will therefore able to support its business operations effectively hence able to build more houses for sale.
4.0 Analysis of the implications of government policies
Government policies have created a number of implications which affects Wimpey Homes Company. These policies have come with a ...