The Government & Business Activity
Business: Edexcel IGCSE, topic 1.6.2
How Governments Can Affect Business Activity
Governments can either promote or limit business activity.
Infrastructure provision
- Infrastructure provision can offer opportunities for construction businesses.
- E.g. the HS2 project requires construction companies to build to train links.
- These projects, therefore, benefits private businesses.
Legislation
- Legislation can either encourage or constrain business activity.
- Legislation can encourage enterprise in small businesses. This helps drive economic growth.
- However, legislation also holds the potential to limit business activity. This may be through the following:
- Introducing stricter health and safety regulation.
- Preventing discrimination in the workplace.
- Encouraging competition and regulating monopolies.
Trade policy
- If the government introduces protectionist trade measures, private businesses can be negatively impacted.
- By introducing tariffs or quotas, the price of exports are raised.
- This reduces demand. Therefore, companies lose business.
- Similarly, if the governments of other countries introduce trade barriers, the price of importing goods rise. This may also negatively impact domestic business.
Test yourself on The Government & Business Activity
Is it possible for infrastructure projects to benefit private businesses?
Which of the following has the potential to limit business activity?
Impact of a Protectionist Trade Measure