Economics Chapter on Privatization and Nationalization
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Questions and Answers

What is a primary benefit of privatization?

  • Removal of political interference (correct)
  • More market options available
  • Increased governmental control
  • Guaranteed employment for all citizens

Nationalization leads to job losses for the population.

False (B)

What is the main outcome of nationalization regarding profits?

Profits go to the state for funding development projects.

Privatization improves efficiency because of competition and the drive to increase _____

<p>profits</p> Signup and view all the answers

Match the following concepts with their definitions:

<p>Privatization = Transferring government-owned firms to the private sector Nationalization = Taking over private firms by the state Benefits of Privatization = Improved quality services at affordable prices Disadvantages of Nationalization = Too much political interference by parliament</p> Signup and view all the answers

Which of the following payment methods allows customers to make payments using their mobile phones?

<p>Mobile Money and Mobile Wallets (C)</p> Signup and view all the answers

Credit card holders must repay the amount spent by the due date to avoid interest charges.

<p>True (A)</p> Signup and view all the answers

Who owns and operates businesses in the public sector?

<p>The government</p> Signup and view all the answers

A _______ is a cheque issued by one bank to another for payments in the name of a specific person or organization.

<p>Bank Draft</p> Signup and view all the answers

Match the payment methods with their descriptions:

<p>Debit Cards = Used to buy goods with sufficient bank balance Telegraphic Money Transfer = Electronic transfer between bank accounts Internet Banking = Access accounts and make payments online Credit Cards = Paying for purchases on credit with repayment required</p> Signup and view all the answers

What is the primary aim of the private sector?

<p>To make profits (C)</p> Signup and view all the answers

Dividends in the private sector are paid to the government.

<p>False (B)</p> Signup and view all the answers

What type of products does the public sector primarily provide?

<p>Public goods such as street lights and health care</p> Signup and view all the answers

What is one advantage of a credit union?

<p>They share profits in the form of dividends (D)</p> Signup and view all the answers

Franchises do not have to share their revenues with the franchisor.

<p>False (B)</p> Signup and view all the answers

What are the two types of limited companies?

<p>Private Limited and Public Limited</p> Signup and view all the answers

A business that uses the name, logo, and trading system of an existing business is called a ______.

<p>franchise</p> Signup and view all the answers

Match the following terms related to business types with their descriptions:

<p>Credit Union = A cooperative organization serving its members Franchise = A business that uses a well-known business model Limited Company = A business structure limiting personal liability Private Limited = A type of company with limited shares for private ownership</p> Signup and view all the answers

What is a defining characteristic of a sole trader business?

<p>One person provides the capital and receives all the profit. (A)</p> Signup and view all the answers

A partnership can be formed by up to 50 persons.

<p>False (B)</p> Signup and view all the answers

List one advantage of being a sole trader.

<p>Owner has complete control.</p> Signup and view all the answers

In a sole trader business model, the owner has __________ liability.

<p>unlimited</p> Signup and view all the answers

Which of the following is an example of a business that could operate as a sole trader?

<p>Retail store (C)</p> Signup and view all the answers

Match the types of partnerships with their description:

<p>Joint venture = Establishes to perform a single business activity Syndicates = Group authorized for a specific business transaction Limited liability = Partners have limited personal liability</p> Signup and view all the answers

A partnership must always involve a written partnership deed.

<p>False (B)</p> Signup and view all the answers

What is one significant disadvantage of operating as a sole trader?

<p>Difficulty in raising capital.</p> Signup and view all the answers

Which type of economic system has the least government intervention?

<p>Free Market (B)</p> Signup and view all the answers

In a Planned/Command Economy, the consumers have complete freedom in making economic decisions.

<p>False (B)</p> Signup and view all the answers

What are the two types of shares?

<p>Preference and Ordinary</p> Signup and view all the answers

A _____ is a loan given to a company from members of the public.

<p>debenture</p> Signup and view all the answers

Match the types of Economic Systems with their characteristics:

<p>Traditional = Based on customs and agriculture Free Market = Private ownership with minimal government intervention Planned/Command = Government makes all economic decisions Mixed Economy = Combination of government and private sector involvement</p> Signup and view all the answers

What is one disadvantage of a Free Market economy?

<p>Great inequality with income and wealth (C)</p> Signup and view all the answers

What do shareholders receive when a company makes a profit?

<p>dividend</p> Signup and view all the answers

In traditional economies, agriculture is usually not the main occupation.

<p>False (B)</p> Signup and view all the answers

Which department is responsible for finding out what customers want?

<p>Marketing (B)</p> Signup and view all the answers

The Personnel/Human Resource department is mainly responsible for managing the finances of a business.

<p>False (B)</p> Signup and view all the answers

Name one responsibility of the Research and Development department.

<p>Improving product or service quality</p> Signup and view all the answers

The ______ department ensures high-quality production and manages raw materials.

<p>operations</p> Signup and view all the answers

Match each department to their main function:

<p>Marketing = Promotion and advertising Finance = Managing cash flow Personnel/Human Resource = Recruiting staff Research and Development = Product improvement</p> Signup and view all the answers

Which stakeholder is responsible for providing high-quality goods and services?

<p>Employers/Owners (A)</p> Signup and view all the answers

Stakeholders in a business only include employees and customers.

<p>False (B)</p> Signup and view all the answers

What is one role of the Finance department?

<p>Managing the budget</p> Signup and view all the answers

Flashcards

Privatization

The process of transferring government-owned companies to private ownership.

Nationalization

The process of the government taking over private companies and making them publicly owned.

Privatization Benefit: Efficiency

Privatization encourages competition among companies, leading to better quality services and lower prices.

Nationalization Benefit: Development

The government uses profits from nationalized companies to fund development projects and expand public services.

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Nationalization Disadvantage: Political Interference

Too much government involvement in nationalized companies can hinder their ability to make profits.

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Debit Card

An ATM card issued by banks that allows you to buy goods and services by swiping the card. The issuing bank's computer system authorizes the purchase if there are enough funds.

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Credit Card

A card used to pay for goods and services on credit from a business. Cardholders have a credit limit and must repay the amount by a due date. Interest rates are charged if the payment is not made on time.

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Bank Draft

A check issued by one bank to another bank for payments, usually in a foreign currency. It's payable to a specific person or organization.

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Telegraphic Money Transfer (T/T)

An electronic method of transferring money between bank accounts. Banks use computers, telex, or cables to carry out the transactions.

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Internet Banking

A service that allows customers to access their bank accounts online to check balances and make payments.

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Mobile Money/Mobile Wallet

An app on a phone that connects to a bank account and allows you to pay for items using your phone.

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Private Sector

The part of the economy where businesses are owned and operated by private individuals. They aim to make profits.

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Public Sector

The part of the economy where businesses are owned and operated by the government. They aim to provide social services.

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What is a Sole Trader?

A business owned and run by one person who provides all the capital and takes all the profits.

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How is a Sole Trader formed?

There are no legal formalities required for formation, but the business must be registered.

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What are the advantages of a Sole Trader?

Easy to set up with low capital requirements, full control for the owner, all profits go to the owner, and it is based on personal skills and interests.

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What are the disadvantages of a Sole Trader?

Unlimited liability, meaning personal assets can be used to pay off business debts, difficulty in raising capital, long working hours, and lack of continuity upon the owner's death.

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What is a Partnership?

A business formed by 2 to 20 individuals who share capital and responsibilities.

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How is a Partnership formed?

A partnership deed, a legal document outlining the partnership terms, may be used.

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What is a Joint Venture?

A special type of partnership formed for a single business activity and dissolved once the activity is completed.

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What is a Syndicate in business?

A group of individuals or organizations given legal authority to perform a specific transaction.

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Credit Union Advantage: Shared Profits

Members of a credit union benefit from lower prices and share in the profits through dividends.

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Credit Union Disadvantage: Limited Resources

Credit unions may struggle to expand due to limited member resources and potential low profits.

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Franchise Advantage: Established Name

A franchise benefits from using a well-known brand name, reducing the risk of failure.

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Franchise Disadvantage: Limited Control

Franchisees have limited control over operations, including suppliers and revenue sharing.

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Limited Company Feature: Limited Liability

Limited companies offer shareholders protection, limiting their financial risk to their investment.

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What are the functions of the Marketing department?

The Marketing department focuses on understanding customer needs and promoting products/services. Their functions include pricing, advertising, distribution, and market research.

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What is the role of the Personnel/Human Resource department?

The Personnel or Human Resource department manages the workforce of a business. They recruit, train, discipline, and handle employee benefits.

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What is the Finance department responsible for?

The Finance department manages the financial well-being of the business. They handle accounting, cash flow, budgeting, and securing financing.

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What is the role of the Research and Development department?

The Research and Development department focuses on improving products or services to stay competitive. They conduct research, redesign products, and conduct feasibility studies.

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Why is identifying stakeholders important for a business?

Identifying stakeholders is essential because it allows the business to understand who depends on its survival and who has an interest in its operations.

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What are the responsibilities of Employers in a business?

Employers are responsible for providing high-quality goods/services at a fair price. They must manage resources efficiently and ensure fair working conditions and wages for employees.

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Who are some examples of stakeholders?

Stakeholders include individuals or groups with direct interests in a business, such as Employees, Employers/Owners, Customers, Suppliers, Government, and Members of society.

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What are the two main types of shares?

Preference shares and Ordinary shares are the two main types of shares in a company. Preference shares offer fixed dividends and priority in payment compared to ordinary shares, which have voting rights and fluctuating dividends dependent on company profits.

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What is a share certificate?

A share certificate is a legal document issued to a shareholder, proving their ownership of a specific number of shares in a company.

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What is a Debenture?

A debenture is a loan given to a company by an individual or institution. The lender earns a fixed interest rate regardless of whether the business makes a profit.

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What is an Economic System?

An economic system is a way a society organizes its resources to produce goods and services to meet the needs and wants of its people.

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What is a Traditional Economic system?

A traditional economic system relies heavily on customs, traditions, and bartering. The majority of people are engaged in agriculture to produce enough food for their needs.

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What is a Free Market Economic system?

A free market economic system is characterized by private ownership of resources, minimal government intervention, and a focus on consumer driven production.

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What is a Planned/Command Economic system?

A planned/command economic system is controlled by the government, which makes all major economic decisions, including resource allocation and production.

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What is a Mixed Economic system?

A mixed economic system combines elements of both free market and planned economies. Private businesses are allowed, but the government plays a role in regulating and controlling the economy.

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Study Notes

The Barter System

  • Early people exchanged goods directly for goods they needed.
  • This direct exchange is called "direct production".
  • People hunted and gathered for basic needs.
  • Later, surpluses led to barter exchange.

Advantages of Barter

  • Allowed individuals to get rid of surplus goods.
  • Enabled access to a wide variety of needed goods.
  • Facilitated improvements in daily life.
  • Spurred specialization and increased productivity, resulting in more wealth.

Disadvantages of Barter

  • Double Coincidence of Wants: A person needed to find someone who had what they wanted and simultaneously wanted what they had.
  • Exchange Rates: Determining the appropriate amount of one good to exchange for another was difficult.
  • Divisibility of Goods: If a good couldn't be divided, bartering became a challenge.
  • Storage of Wealth: Stored goods could spoil or otherwise deteriorate, hindering its use as a long-term value store.

Instruments of Exchange

  • Barter System (early method)
  • Bill of Exchange (document directing payment)
  • Electronic Transfers (digital funds transfer)
  • Telebanking (transactions via phone)
  • E-commerce (internet-based buying/selling)
  • Cheque (written instruction for payment)
  • Money Order (method for overseas payments)
  • Debit Cards (ATM cards for purchases)
  • Credit Cards (payment with credit)
  • Bank Draft (cheque from one bank to another)
  • Telegraphic Money Transfer (electronic transfers)
  • Internet Banking (online access to accounts)
  • Mobile Money/Wallet (payment through app)

Brief History of Trading Instruments

  • Money is anything generally accepted for purchase.
  • Barter systems were used before money.
  • Early forms of money included gold and silver.
  • Modern money includes banknotes, coins, and electronic forms.

Private vs. Public Sector

  • Private Sector: Businesses owned by individuals.
  • Public Sector: Businesses owned by the government.
  • Key differences include ownership, source of finances, distribution of profits, and types of businesses.

Forms of Business Organizations

  • Sole Trader: One person owns the business.
  • Partnership: Two or more people own the business.
  • Co-operative: Business owned and controlled by its users.
  • Franchise: Business using another's name and operating system.
  • Limited Company (Private or Public): Separate legal entity; shareholders are liable only to the extent of their investment.

Privatization vs. Nationalization

  • Privatization: Transferring government-owned firms to the private sector.
  • Nationalization: Taking over private firms by the state.
  • Benefits and disadvantages exist for both.

Economic Systems

  • Traditional: Based on traditions and customs, often focused on agriculture.
  • Free Market: Individuals control resources; minimal government intervention.
  • Planned/Command: Government controls resources and production.
  • Mixed: Combines elements of market and planned economies.

Functional Areas of a Business

  • Production: Turning raw materials into goods or services.
  • Marketing: Promoting and selling products/services.
  • Personnel/Human Resources: Managing employees.
  • Finance: Managing finances and cash flow.
  • Research and Development: Improving products/services.

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Test your understanding of the concepts of privatization and nationalization in this engaging quiz. Explore the benefits of privatization, the implications of nationalization on profits, and the role of public and private sectors. This quiz also covers payment methods and financial responsibilities.

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