• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Externalities

Extracts from this document...

Introduction

Externalities are known as the third party or side effects which affect business decisions. Basically externalities occur externally or outside the market, those who are affected are not involved with the decision. These effects are created from production or consumption goods and services. Externalities are divided into two categories: Negative externalities and Positive externalities. Positive externalities are the benefits to third party of business activity which means the effects benefit the business. Negative externalities in contrast are the negative effects of business activity; these effects are unfavorable to the business or the business causes these effects. Externalities have a huge impact on business development. Business development varies according to externalities. Positive externalities are most likely to benefit the business and increase development whereas negative externalities are more likely to contract business development or the business might encounter ethical issues depending on the externality. A positive externality include new infrastructure, research and development, research in technology, education, health provisions, increased employment, to name a few. New infrastructure will benefit the business and allow the business to grow and develop. Other positive externalities such as research and development will not only be useful to the business as they would gain more knowledge and understanding, the research could also be used for promoting the business. ...read more.

Middle

Noting that our resources are scarce, using up the environment will add onto the scarcity, which will cause the prices of goods and services to rise, therefore businesses will have difficulty pleasing consumers and the market is liable to inflation. Future generation should also be considered in this situation, as negative externalities affect future growth. The usages of many of these environmental resources are not even charged, such as overuse of waste facilities. Negative externalities could also dominate the positive externalities, such as anti-social behavior of people would cause inefficiency of labor productivity. Therefore these externalities containing costs and benefits contribute to business development. As a result, in the competitive market, beneficial or inadequate goods might be produced and consumed. As we have seen before, business development depends on externalities. How a business is affected by these externalities will be illustrated below by means of Bangladesh's business development. Most production systems can be an aspect of both positive and negative externalities. Some of the positive externalities that Bangladesh has are its agriculture system. These agriculture systems are extremely efficient and can produce large amounts of food. These agricultural systems can also produce outputs which can be used for energy. But the processing of the output in Bangladesh uses more man-labor than technology. ...read more.

Conclusion

Power supply is unreliable in the country. Businesses come across problems with lack of electricity and power and therefore they need their own back-up power which increases cost. Specific negative externalities could be the unavailability of gas supply in certain parts of Bangladesh such as Bogra and Khulna, this limits the growth of gas-based industries and obliges them to use an alternative resource, and again this increases cost and efficiency of labor in competition with other industries. Another negative externality is the strikes and blockades that are frequent in the country, whether aroused from rebelling against the government or the business. This highly affects the business as workers are unable to come to work, threatened by the resulting violence and blocking transport. As a result productivity is decreased. Although, Bangladesh earns huge profit from exporting goods such as ready made garments and such, the factories contribute to environmental hazards, which is a huge negative externality. Lastly, Bangladesh is relatively small for the large amount of population it restrains. Therefore as the economic growth increases, more buildings are being built, which not only contribute to environmental hazards but also to lack of space. As a result, the buildings are compiling up and are constricting. This causes increase in traffic and thus contribute to cost of time, for example, workers are likely to be late to work and therefore the productivity decreases, "time equals money". ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Business Studies essays

  1. Advance Professional Development

    And at the end it was a pleasurable movement for me as team leader when our project was complete before the submission deadline. The second managerial experience was a professional one within a very hard and difficult situation. When Pakistan army start military operation in northern areas of the country

  2. This paper will concentrate on Apples Apple TV business, and its complementing iTunes business.

    Apple stores, such as the ones in New York and London, are a tribute to the customers, to whom they owe a smile of appreciation [23]. That is the emotional connection that the Apple Brand is built around. Today, Apple is selling huge volumes of products to a much wider, and perhaps less emotional, audience.

  1. Marketing. In my project, I am going to be looking at how Nestls Smarties ...

    People are more likely to buy one of these products instead of a less well-known product. The packaging for Smarties is instantly recognisable for its unique tube design, its bright colours and its bubble writing. This takes up the more than half of the packaging the rest of the packaging gives us information.

  2. starting a small business

    Loans Halifax If I want to borrow money Halifax would probably be the best bank to take loans so therefore I would be borrowing �25000 and this is what the bank has calculated for me: Monthly Repayment: �545.92 Total Amount Payable: �32.755.01 Number of monthly repayments: 60 At the rate

  1. New business plan

    We can set strategies easily to fit the operation. In addition, use the IP from Beijing Royal Food restaurant, therefore the company can amortise the IP in their operation time. As a limited liability company, we should get registration from the Ministry of Economic New Zealand.

  2. Business Plan. Dhaka fashion will be a magazine that is completely devoted to fashion. ...

    the lungi up and tuck it into his waist, ready for action. On special occasions, they may wear a pajama-panjabi. In the urban areas men have, however, largely adapted to western costume. Sari is women's universal dress, both in the cities and countryside.

  1. The Business Environment of Coca Cola

    Political factors for Coca-Cola: The government plays a role within the operation of manufacturing products in terms of regulations. All businesses must follow the rules, that the parliament creates or changes. The Coca-Cola Company could cause potential fines, if they don?t follow the new rules.

  2. Marketing Plan. Launching a Karaoke Bar in Bangladesh

    In the beginning of the business KARAOKE AVENUE shall not have any major competitor since we are the first karaoke bar in Bangladesh, but we might still see some café as our competitors, for example – The Stage (music cafe), Déjà vu Café, H20 Lounge, Kozmo Lounge and others.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work