Economics



Economics

i) Explain both the positive and Normative aspects of strategy showing the application of the concepts to other social sciences.

Whenever you are reading articles on current affairs it is important to be able to distinguish where possible between objective and subjective strategies. Very often the person writing an article has a particular argument to make and will include in their piece subjective strategies about what ought to be or what should be happening. Their articles are said to carry value judgements, they are trying to persuade you of the particular merits or demerits of a particular policy decision or issues. These articles may be lacking in objectivity.

Positive Strategies

Positive strategies are objective strategies that can be tested or rejected by referring to the available evidence. Positive economics deals with objective explanation and the testing and rejection of theories. For example:

A rise in consumer incomes will lead to a rise in the demand for new cars.

A fall in the exchange rate will lead to an increase in exports overseas.

More competition in markets can lead to lower prices for consumers.

If the government raises the tax on beer, this will lead to a fall in profits of the brewers.

A reduction in income tax will improve the incentives of the unemployed to search for work.

A rise in average temperatures will increase the demand for chicken.

Poverty in the UK has increased because of the fast growth of executive pay.

Normative Strategies

Normative strategies express an opinion about what ought to be. They are subjective strategies rather than objective strategies - i.e. they carry value judgments. For example:

The level of duty on petrol is too unfair and unfairly penalizes motorists.

The London congestion charge for drivers of petrol-guzzling cars should increase to £25 - three times the current charge.

The government should increase the national minimum wage to £6 per hour in order to reduce relative poverty.

The government is right to introduce a ban on smoking in public places.

The retirement age should be raised to 75 to combat the effects of our ageing population.

The government ought to provide financial subsidies to companies manufacturing and developing wind farm technology.

ii) what is a business model? cite examples, not necessarily from the text which iilustrate the uses of such models.

To extract value from an innovation, a start-up (or any firm for that matter) needs an appropriate business model. Business models convert new technology to economic value.

For some start-ups, familiar business models cannot be applied, so a new model must be devised. Not only is the business model important, in some cases the innovation rests not in the product or service but in the business model itself.

In their paper, The Role of the Business Model in Capturing Value from Innovation, Henry Chesbrough and Richard S. Rosenbloom present a basic framework describing the elements of a business model.

Given the complexities of products, markets, and the environment in which the firm operates, very few individuals, if any, fully understand the organization's tasks in their entirety. The technical experts know their domain and the business ...