Business Economics

Role of Business Economics for Development

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Introduction

In current market scenario the business economic aspects are considered as one of critical aspect that can influence the overall development opportunities. In addition to this, there are number of issues and challenges that are associated with the economic factors so it is essential for businesses to consider it as significant element. It plays key role in strategies design, growth, expansion and management (Baye, 2010). Current study focuses on macro and micro economic theory and its impact on the UK economic system. It will also provide information about the changes in economic aspects that have taken placed in last seven years. Along with this, it will also consider the businesses expectations from Central Bank of England to overcome issues.

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Micro and Macro Economic Theory and its Impact

Macro economic is considered as branch of economic analysis that provides a learning about the behavioural aspects in context to diverse economic units. It has been identified that the Theory of prices is a macro economic theory that covers number of factors in regard to economy such as inflation, deflation and reflation. Any kind of changes in theory of prices may influence the overall development of UK economic system (Ceccherini-Nelli and Priebe, 2007). This is because the changes in inflation rates and deflation rates impacts the perception of people in regard to prices. For example, during advancement in inflation rates the group prefer goods and services at low cost in order to manage income level (Galliers and Leidner, 2014). It also forces businesses to decrease the cost of products and services which affects taxation and other economic development in negative manner.

On the other side, micro economics is referred as economic analysis that provides learning about economic behaviour of individual unit. It allows organisations to study any specific economic factor and then analyse it with other units. It is significant to consider laws and principles of micro economics because it influences overall economic development. In this respect, the theory of product pricing affects the working of entities and economic elements. It covers theory of consumer behaviour and theory of production and cost (Lee, 2014). In addition to this, the changes in consumer behaviour affects overall development in diverse manner. For example, the customers are not attracted towards retail sector and they are not spending more on purchase of retail products. It means the businesses are facing key issue in regard to failure aspects, it also influences the overall development of UK economic system (Nordhaus, 2010). This is because the failure of firms affects income level, taxation, etc. Cost of production is also one of critical factor that impacts the overall development of economic system. For instance, the businesses are focusing on low cost production processes, it increases the profit margin ratio of organisations. Improvement in profit margin ratio of companies is beneficial for advancement in economic factors.

It has been identified that there are number of various key issues has been occurred due to rapid changes in micro and macro economic theories because it focuses diverse development activities (UK economic forecast. 2016). Micro and macro economic factors must be considered in appropriate manner so that goals can business can have impressive level of success. Production units working can also be influenced by the changes in micro and macro elements. Organisations must focus on micro and macro theories because it provides various opportunities in the market. Better profit can be attained that will influence economic development (Bold and Vega, 2013).

Changes in UK Economy and its Impact

It has been identified that in recent years the economic aspects in UK has changed in diverse manner. It has also impacted the overall working of business entities, so it is essential for management to consider changes as critical aspects. In 21st century the number of changes has referred in context to economic structure. These kinds of transformation in the structure has influence the operational activities of business organisations. As per the structured study, the organisations are focusing on norms and regulations in regard to economy which are set out by government (Cardoza and Fornés, 2011). It has been noticed that in the starting of 18th century the pricing and market structure was considered as one of critical aspect in UK economy. UK was also considered as one of the most potential and largest economy in the international market. In recent years the free flow of products and services has promoted effectively and it has influenced the work culture of businesses (Dowling, 2009).

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Moreover, in last seven years the government has focused on improvement of economic system through advancement in rate of interest and taxes. These kinds of changes in UK economy has forced organisations to ensure about activities that saves their taxes and provide better profit (Hoover, 2009). However, the increase in rate of interest and taxes has influenced overall UK economy in positive manner. It has boosted the financial strength of UK government. It has been witnessed that the key objective behind increasing tax and interest rates was to spend more amount of money in enhancement of public services in the country.

Other than this, economic structure has also changed by increased focus on financial sector. It means the number of economic policies has been designed in order to provide support to financial institutions rather than manufacturing sector. It has been identified that these kinds of changes in UK economy has influenced overall development in positive manner (Nordhaus, 2010). With a free flow of products and services the business firms has analysed number of opportunities in the market that provides better growth and development. In addition to this, the advancement in tax rates and rate of interest has decreased the profit margin ratio of entities but provided a strength to UK economic system. It has also been noticed that the UK economic system has also faced the recession conditions that has influenced overall working of entities (Dale, 2010). It clearly reflects that the rapid changes in economic aspects affects the overall development. Moreover, in last seven years the UK government has established number of policies to strengthen the economic conditions. It has also helped in overcome issues like recession, etc.

Expectations From Central Bank of England

As per the structured study, there are number of expectations that businesses demand from Central Bank of England. It has been witnessed that the organisations expect that Central bank will provide innovative ways to improve cash management so that entities can have better opportunities in the market. It is also one of key expectation that the Repo Rate must be low because the decrease in Repo Rate influences the working of businesses in diverse manner (Nordhaus, 2010). For example, the company is looking forward to expand business and they require financial support from commercial banks. In this situation if Repo Rate is high then organisation have to pay high interest on bank loans. It may affect the overall growth opportunities of business in negative manner. It means the Central Bank of England needs to cut down the Repo Rate.

Moreover, the entities also expect that the Central Bank to decrease the tax rates because it also decreases the profit margin ratio of firm. Decrease in tax rate may also affect the income level of government in negative manner. But the reduction in Repo Rate and interest rate is beneficial for government as well as businesses (Dowling, 2009). This is because the modifications in rate of interest will motivate businesses to invest more in the nation and lead economic system to further developments. These kinds of changes by Central Bank of England also improves the income level of people and enhance economic aspects.

Other than this, the financial institutions also expects that the new policies will be established to improve opportunities. Companies also demand that the Central Bank will focus on equity market as it provides a sustainable opportunities for the growth. Innovative investment plans need to be designed so that the businesses can have better developments (Cardoza and Fornés, 2011). In order to ensure about the risk, lowering interest rates is not very help in stimulation economic growth. It means the Central Bank of England requires effective development of policies and strategies that ensure about the risk. It is also one of expectation that the Central Bank of England will provide various financial support to the organisations in order to manage commercial lending, checking, insurance and many more.

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Conclusion

As per the above study, it can be concluded that the business economic plays a key role in overall development of UK economy. It has been identified that the issues and challenges regarding economic aspects need to be consider in appropriate manner because it impacts businesses in significant way. Micro and Macro economic theory also influences the growth opportunities in diverse manner. In the support of this, it can also be concluded that in the past seven years the UK economic system has changed in diverse manner. Government has started focused on improvement of economic aspects that helps financial sector rather than manufacturing industry. Interest rate and taxes has also increased in recent years that has influenced overall development. Moreover, the businesses expect that the Central Bank of England provides a financial support to economic development.

References

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