business and economy.pdf

Benefits of Business to the Economy -employment = businesses create jobs, this leads to lower unemployment in the economy and reduces social welfare payments for government (Unit 6 Notes page 29) -taxation = with more people employed and more profits there is greater tax revenue for the governme...

Benefits of Business to the Economy -employment = businesses create jobs, this leads to lower unemployment in the economy and reduces social welfare payments for government (Unit 6 Notes page 29) -taxation = with more people employed and more profits there is greater tax revenue for the government eg PAYE, VAT, corporation tax etc, some of this revenue is used for education, social welfare, health, infrastructure etc (Unit 6 Notes page 33) -inflation = as business expands and competition intensifies, business will become more efficient, causing costs to fall, this helps to keep inflation down eg Dunnes and Tesco have to keep prices lower compete with Lidl and Aldi (Unit 6 Notes page 26) -living standards = the impact of business on job creation and greater range of goods and services help to greatly improve public standard of living -community development = Local Enterprise Offices put particular focus on regenerating areas and helping small businesses get going, this can create role models, enhance community spirit and stimulate growth in places that have seen business closures and migration away from the area -investment = reinvesting profits in business enables firms to expand, create more jobs and increase sales and profits -economic growth = the expansion of business leads to economic growth which in turn increases the funds for government enabling more grant aid to be provided to keep the cycle going 37 -reduced reliance on FDI = while the presence of many of the world's largest MNCs in Ireland provides jobs and increases government revenue, these firms might be less loyal to Ireland if there are better opportunities offered in other countries, they might relocate quicker than an Irish-owned business, so increasing entrepreneurship in Ireland means that the country is less exposed to the risk of the MNCs moving away -improved BOP = exports will increase as more home-produced products are sold abroad in new markets, imports might also decrease, as domestically produced goods might be offered to consumers to compete against the imports (import substitution) (Unit 7 Notes page 11) -spin-off effects = an enterprise culture could develop, where more local people are inspired to become entrepreneurs, successful entrepreneurs can become role models and their stories show budding entrepreneurs a path to success, new businesses will also increase the demand for local suppliers of goods and services Disadvantages of Business to the Economy -unemployment = one of the side effects of competition is that smaller local firms may close down as bigger firms grow, this causes unemployment, increased social welfare payments and reduced government income through tax revenue (Unit 6 Notes page 29) -inflation = to maximise profits, firms can increase prices rather than cutting costs and increasing efficiency which can lead to inflation and employees may look for higher wages to compensate for higher prices, this spiral of price and wage rises following each other causes inflation and can make the country more expensive than its trading partners, and so cause difficulties for firms engaged in foreign trade (Unit 6 Notes page 26) -environment = in the pursuit of profit, firms may not pay enough attention to the environment and what they are doing to it (eg dumping waste instead of paying to have it safely disposed of), the environmental costs associated with increased business activity include pollution of rivers, seas and the air which harm the economy, especially the food and tourism sectors because people will not buy Irish food or holiday here if Ireland is considered to be polluted -social costs = increased business activity causes social costs including increased road traffic, road delays, noise pollution and health risk to workers -competition = foreign businesses enter Irish markets if there is a lot of activity, while this is good for Irish consumers, who can buy cheaper items, it might cause Irish competitors 38 to close if they cannot compete with the foreign entrants of whom often repatriate (send) Irish company profits back home