Grade 9IGCSE
Sometimes governments do not provide goods and services but they still influence the activities of private firms.
Analyse how they might do this.
Time Duration for submitting the Article is:
September 9th to September 15th, 2013
Write here your answer in 500 Words.
Write here your answer in 500 Words.
Government don’t provide goods and services but government can control the firms and the company that provide good and services by giving them indirect tax, direct tax. Direct tax is Income Tax Department administers various direct taxes, which have different rates Pay As You Earn (PAYE), corporation tax, withholding tax and advance tax. Indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax such as the consumer. Example of indirect tax is sales tax, a specific tax; value added tax (VAT), or goods and services tax (GST). Tax can control the consumer that will buy that goods or services because if the tax is high the price of the goods or services will automatically rise and if the price rise there will be lesser people that will buy does goods or services. For example the firm make the goods and sell it to the consumer with Rp1000 and the tax from the government is 20% of it so Rp1000 X 20%= Rp200 so the consumer must pay it Rp1200.Government can also make the goods or services have more consumers by giving the firms or the company subsidies that will decrease the cost of production so the company can decrease the price to the consumer. If the price lower consumer will rise for example the firm make a one goods costing Rp2600 and the government give the subsidies Rp600 and the firm want the profit is Rp300. Rp2600+Rp300-Rp600 = Rp2300 that should be paid by consumer after it subsidies by the government Rp2600+Rp300= Rp2900 that should be paid by the consumer before it subsidies by the government this how government control the demand. There is other way to decrease the demand by increasing the minimum wages that the company or firm needs to pay. By increasing the wages the company operating cost will increase so the company or the firm need to increase the price to stable the amount of profit. For example government set the minimum wages Rp30.000 the company total operation cost is Rp10.000 and take a profit Rp20.000 and a month later it the minimum wages increase Rp10.000 Rp30.000+Rp20.000=Rp50.000 before it increase Rp30.000+Rp20.000+Rp10.000=Rp60.000 that should be pay by the consumer now after government increasing the minimum wages.
ReplyDeleteGovernment does this to correct market failure, achieve more equitable distribution
Of income and wealth equitable distribution of income and wealth. The example of it is Laws on minimum ages for buying cigarettes and alcohol, Equal Pay Act and acts preventing other forms of discrimination, laws which restrict flight times at night, Government appointed utility regulators who may impose price controls on privatized monopolists e.g. telecommunications, the water industry. In a free market economic system, scarce resources are allocated through the price mechanism where the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals. When demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply (output) to meet rising demand from consumers. Day to day, the free market mechanism remains a tremendously powerful device for determining how resources are allocated among competing ends.
Government don’t provide goods and services but government can control the firms and the company that provide good and services by giving them indirect tax, direct tax. Direct tax is Income Tax Department administers various direct taxes, which have different rates Pay As You Earn (PAYE), corporation tax, withholding tax and advance tax. Indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax such as the consumer. Example of indirect tax is sales tax, a specific tax; value added tax (VAT), or goods and services tax (GST). Tax can control the consumer that will buy that goods or services because if the tax is high the price of the goods or services will automatically rise and if the price rise there will be lesser people that will buy does goods or services. For example the firm make the goods and sell it to the consumer with Rp1000 and the tax from the government is 20% of it so Rp1000 X 20%= Rp200 so the consumer must pay it Rp1200.Government can also make the goods or services have more consumers by giving the firms or the company subsidies that will decrease the cost of production so the company can decrease the price to the consumer. If the price lower consumer will rise for example the firm make a one goods costing Rp2600 and the government give the subsidies Rp600 and the firm want the profit is Rp300. Rp2600+Rp300-Rp600 = Rp2300 that should be paid by consumer after it subsidies by the government Rp2600+Rp300= Rp2900 that should be paid by the consumer before it subsidies by the government this how government control the demand. There is other way to decrease the demand by increasing the minimum wages that the company or firm needs to pay. By increasing the wages the company operating cost will increase so the company or the firm need to increase the price to stable the amount of profit. For example government set the minimum wages Rp30.000 the company total operation cost is Rp10.000 and take a profit Rp20.000 and a month later it the minimum wages increase Rp10.000 Rp30.000+Rp20.000=Rp50.000 before it increase Rp30.000+Rp20.000+Rp10.000=Rp60.000 that should be pay by the consumer now after government increasing the minimum wages.
ReplyDeleteGovernment does this to correct market failure, achieve more equitable distribution
Of income and wealth equitable distribution of income and wealth. The example of it is Laws on minimum ages for buying cigarettes and alcohol, Equal Pay Act and acts preventing other forms of discrimination, laws which restrict flight times at night, Government appointed utility regulators who may impose price controls on privatized monopolists e.g. telecommunications, the water industry. In a free market economic system, scarce resources are allocated through the price mechanism where the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals. When demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply (output) to meet rising demand from consumers. Day to day, the free market mechanism remains a tremendously powerful device for determining how resources are allocated among competing ends.
The government can influence private firms by imposing taxes, providing subsidies and also by using rules and regulations.
ReplyDeleteFirstly, the government can impose taxes towards the people. There are two types of taxes, direct and indirect taxes. Direct taxes are taxes that are not avoidable, not shiftable and is individually paid (this is taken from the person’s income, etc.), while indirect taxes can be avoidable, shiftable and is paid indirectly by individuals (this includes GST, VAT on goods and services such as food, clothes, etc.). By imposing taxes, the government can control the activities of the firm by reducing the consumption of demerit products (such as cigarettes, alcohol, etc.), by protecting the local producers and also for balance of payments (imports and exports). This can be done by, for instance, the Indonesian government impose very high taxes on the Sampoerna cigarette company, which makes the prices of the cigarettes higher, making demand fall, which is one of the aims of the government. Also, the government can protect local producers by imposing high taxes on imports, which also leads to balance of payments. By doing this, imports will become more expensive, making consumers rather buy exported goods than imported ones, making the payment balanced for import and export if the country imports more than it exports.
Another way is to provide subsidies. Subsidies are provided so that goods and services can become more affordable for the local people. By giving subsidies, the government can ensure that necessary goods, such as oil, sugar, etc. is affordable for everyone so everyone can consume it. This can also affect the domestic producers, because by having subsidies, demand will rise, making these domestic producers more competitive. For example, Pertamina. Pertamina sells petroleum that is being subsidised by the government, and is subsidised for Rp 6,500, compared to the normal price of petrol, which usually ranges to Rp 9,000-10,000, people would rather buy the subsidised fuel than buying from other petrol corporations such as Shell, Total, etc. and therefore, Pertamina is the leading source of petrol in Indonesia.
The government also creates rules and regulations that can protect or reduce de-merit goods and services in the country. This includes restricting harmful drugs to be imported to the country, having laws that a person under 18 are not able to smoke or drink alcohol, and rules and regulations are also used to protect the employees of the country, such as providing health and safety laws, protecting employees from discrimination, etc. From creating these rules, the demand for a product may either rise or fall. For instance, the government has banned alcoholic drinks to be sold near schools, with this policy, the demand of alcoholic drinks will decrease since there are less places to get the beverages and it might become unavailable for students to get alcoholic drinks around the school area.
The government doesn’t need to produce goods&services to control the private firm, some of the firm were depending on the government. They are relying on the subsidies that give by government to them, taxes imposed on their products, rules, and regulations. There are 2 types of taxes direct, and indirect taxes. Direct taxes are paid by an individual , which is imposed on our salary or wages. We can’t avoid indirect taxes, this I caused by our income /salaries that we received already imposed by taxes that is given by the government based on how much salary that we received , it also non avoidable because we can’t give throw the burden of tax that is imposed on another person, it’s different with indirect taxes.
ReplyDeleteIndirect taxes is the type of tax that is imposed on goods &services, we can avoid indirect taxes by not buying the goods & services that is provided by the firm, company, etc.. We can shift the tax that we received to other person by increasing the price of the goods & services. For ex: Djarum group produces a cigarette that cost RP 10.000 per box , then I was imposed 20% tax by the government the price will become RP 10.000+ (20%*10.000) =12. 000. The company will choose to take the burden of taxes by their own or increasing the price of the cigarettes by increasing the price of their goods&services.Usually the government imposed more taxes on demerit goods(harmful goods)like:Cigarettes,alcohol drinks,etc. ,and the price will increase ,because the company can’t take the burden of tax alone so the price of goods will also rise.It will reduce the demand for the goods.
The government also can control the firm by giving them subsidies or not ,it will affect the cost of production o the company.The government often give subsidies to merit goods,It brings a lot of positive externality to the future.the ex of merit goods:education,health care,daily needs.It will help the local people in the countries so they can go to school ,have a better health care,so they can be more healthier.It also used to support t local firm so it can compete with other firms For ex:pertamina only cost their petrol fr Rp 6.500 per/litres.Actually if the government doesn’t give subsidies the price will be around Rp 13000/litres.So some of the private firms will relying on the government subsidies,It will be profitable for both.The government can increase the gdp of the countries,disposable income,and also the needs of citizens.The firm will get more profit,because the government give them subsidies.
The government also can give a rules®ulations for the firm that produce demerit goods (harmful goods). The government makes a rule that alcoholic drinks can’t be sold to certain age under 18 years old. Alcoholic drunks Is harmful it can make people drunk , and when they were driving accident ay occur.
This is the policy that is used by the government to control the private firm activities.
RULES AND REGULATIONS. Rules and regulations are needed in order for the government to be able to control the economic condition. Rules such as:" do not act destructively to public plants/goods" are really impoertant because imagine if those rules are not there, the private firm can just kill those public trees and make pulp from it. But luckily, we have those kind of rules. And that's a form of government's control over private firms' activities. GIVING SUBSIDIES TO NEEDING BUSINESSES. Some businesses might be on the verge of bankruptcy and destruction. They need someone to help them. And this is usually when the government comes in and help the private firms. After te government help them, sometimes there might be a requirement from the government too. Sometimes the government might ask the private firm who they have helped to (example) give money to charities after they succeed. This is a form of government's control and influence over private firms' activities. The next one, RAISING/CUTTING TAX RATES. if the government raises/cuts te tax rates, prices of raw materials can be either higher/lower. If it is higher, the private firms might have problem with it(since the cost has risen). But if it is lower, private firms might be able to gain more profit. All these things are in the government's hands.
ReplyDeleteConclusion: The government can influence/control private firms' activities mostly by controlling the price. Controlling the price means that the government can contribute on decreasing cost(cut tax rates) or increaaing cost(raising tax rates). Aside from that, government can also help firms who needs help by giving subsidies. The last thing that shows that the government is in control is by creating rules and regulations for the firm to follow.
CHRISTHOPER MATTHEW
ReplyDelete9BUS. /03
15/09/2013
Even when government’s not giving goods and services, the economic activity cannot be stopped and the rules and regulations will always be applied no matter what the circumstances are.
The most basic of all economic law, ‘Rules and Regulations.’ Even when it’s the private firms making a move, government can still, and must, limit their activities if it’s going to give a negative effect to the country’s economy. What government wants, and must be achieved, are: One, a stable and lower level of inflation; two, a high and stable rate of employment; and three, a higher economic growth rate. So, if the private firms’ activities interfered those Rules and Regulations (ex. borrowing an excess amount of money, creating a high inflation to the country), government must put a stop on that private firms’ activities.
Second: Taxes. Taxes is currently one of the most reliable help a government can get from their citizens, so whatever economic activities are done, there must be something related with tax; especially with the private firms. The presence of a private firm is not wanted by the government, as they want their public sectors to be more demanded by its citizens so they will get more fund for the country, so the process of production in private firms will always be interfered by the government; and one of them is from tax. Several suppliers of those private sectors must be from the public sectors, which will then affect both sides as they are pushing each other. In the private sector side, they forced the suppliers to reduce the production cost, and in the other side, the public sector side, they wanted to increase the raw materials’ price.
In a lot of countries nowadays, government tried to increase the minimum wage salary for workers, which is again a burden for the private sectors, as the public sectors can get subsidies from the government. As a result, private sectors will hire the least people they could to lower their average cost of production; and back to one of government’s Rules and Regulations, they wanted a “high and stable rate of employment”, but if private sectors will be firing less important people in their firm, how is government suppose to achieve that goal? The only way, is to lower the minimum wage salary back.
Most countries are mixed economics that consist the combination of both planned and market economies. Government does influence the market, producers and consumers. Therefore they influence the private by Tax, Subsidies, Rules, and Regulation. We have to know that tax is divided into two: Direct and Indirect Tax. Direct tax can be referred to the income and wealth, and are imposed on people, whilst indirect taxes are taxation on spending, and are imposed on goods and services. Tax really influences government about private market or producers because it increases government’s capital to produce better public goods and services.
ReplyDeleteSubsidy is a grant given by one party for the support of another. It also can be referred to a measure that keeps prices for consumers below market levels, or keeps prices for producers above market levels or that reduces costs for both producers and consumers by giving direct or indirect support. Tax and subsidies help protecting a country’s economy. Government applies tax and subsidies so that citizens would have considerations on buying local good than imported goods. By that, government increases taxes and supple of imported good and give subsidies to local goods. For example in Indonesia, rice from Bangkok and Indonesia have such difference on price because of tax and subsidies although its quality is the same or even produce in the same country or land. Taxes are differentiated by the income a person had by that it helps us from inflation. Inflation is a continuous rise in the general price of goods and services in a specific time. Government may offer financial assistance such as tax credits for business investment in research and development or a reduction in corporation tax designed to promote new capital investment and extra employment.
Implementation on Rule and Regulations happens to be also the reason that influences the private producers, the economies usually operate with a huge and growing amount of regulations. Regulation may be used to introduce fresh competition into a market, for example; breaking up the existing monopoly power of a service provider. Rules and regulations are used for workers so that they will be protected towards the firms they work in, such as having fair wages and regulations from companies to provide safety goods and services that are strongly important for laborers. Labor’s safety is also important in case or some accidents. If labor’s safety is not considered, accidents might happen causing a company to pay fines for breaking rules and regulations that are given by government. Tax, Subsidies, Rules, and Regulations are implemented so that government can still influence private producers; it aids the economy of the country because without even providing goods and services they still can run firms and the country itself. -Valerie