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Communication
Business technology - refers to applications of science, data, engineering, and information for
business purposes, such as the achievement of economic and organisational goals. The main
element of technology is the idea of change, and how it can affect business and society.
ICT is considered to be all uses of digital technology that exist to help individuals, businesses and
organisations use information. So ICT is concerned with the storage, retrieval, manipulation,
transmission or receipt of digital data. Importantly, it is also concerned with the way these different
uses can work with each other.
Types of technology:
Traditional
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Specialist applications:
Accounting: QuickBooks.
Computer Aided Design (CAD).
Management Information Systems.
In both cases, the e stands for "electronic networks" and describes the application of electronic
network technology - including Internet and electronic data.
E-commerce covers outward-facing processes that touch customers, suppliers and external
partners, including sales, marketing, order taking, delivery, customer service, purchasing of raw
materials and supplies for production and procurement of indirect operating-expense items, such
as office supplies. It involves new business models and the potential to gain new revenue or lose
some existing revenue to new competitors. interchange (EDI) – to improve and change business
processes.
E-business includes e-commerce but also covers internal processes such as production, inventory
management, product development, risk management, finance, knowledge management and
human resources. E-business strategy is more complex, more focused on internal processes, and
aimed at cost savings and improvements in efficiency, productivity and cost savings.
(iv) Automation.
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Benefits of technology to business:
Reach more potential customers, develop a business relationship with potential customers;
Streamline operations, reduce costs, improve efficiency, maximise profit, minimise waste,
devote talent to core business instead of overhead;
Provide better service to customers;
Support better relationships with key partners; and,
Allow customers to better guide the business.
Security;
Privacy;
Intellectual property infringement;
Impact on humans; and,
Distraction.
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NATIONAL INCOME ACCOUNTING &
The standard of living is defined as the level of wealth experienced by a county which is
indicated by the average disposable income of the population, ownership of capital equipment,
the level of research and access to modern technology and the quality and quantity goods and
services enjoyed by citizens.
Level of goods and services available: goods and services are needed to satisfy the needs and
wants of a society.
Average disposable income: per capita GNP reveals the average amount of earnings of each
person in an economy.
Ownership of capital equipment: Capital goods/investment goods are used to create
consumer goods and services locally and for export.
Access to modern technology: countries with a high standard of living must have access to
modern technology to remain competitive maintain a high productivity level.
Research and technology leads to innovation and increases production.
Whereas the standard of living is measured by physical quantity (tangible), a country’s quality of
life is determined by the quality of goods and services enjoyed by citizens (intangible). These
include: safety (low crime rates), good diet and nutrition, environmental quality, quality of health
and educational facilities, life expectancy, rate of infant mortality and the access to public
utilities such as water.
Also the standard of living is mainly determined by the per capita income while the quality of
life is determined by intangible subjective factors.
The Human Development Index (HDI) (Per capita income, literacy rates, inflation)
Physical quality of Life (infant mortality rate, literacy rates, life expectancy)
Measure of Economic Welfare (NI + merit goods – demerit goods)
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National Income
The national income of a country is the total income earned by that country from the production
of goods and the provision of services in a given year after deducting depreciation. It therefore
measures the level of economic activity of a country within a year. Note depreciation of assets is
taken into account when measuring national income.
It can also be defined as the total money value of goods and services produced by a country over
a year.
Businesses produce and households consume. Households owns the factors of production (land,
labour capital and enterprise). Firms must purchase these factors of production to produce.
Wealth flows from one form to another as follows:
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Gross Domestic Product (GDP)
GDP is the total money value of all output produced within a country over a year. The word
‘domestic’ refers to income earned from local production only.
GNP is the total money value of all output produced over one year, both within a country and
from its overseas investments.
Therefore GNP = GDP + overseas earnings by nationals (Net Income from Foreign Assets)
Net Income from Foreign Assets- also called Net Property Income from Abroad. This is
calculated by subtracting payments to foreigners owning local assets from income received from
assets held abroad by citizens. This figure can be positive or negative.
NB: The definition for national income includes adjustments for depreciation (reduction in
capital stock).
Since GNP figures do not accurately measure the standard of living, the following indices may
be used.
This is calculated by dividing a country’s GNP by its total population. That is,
GNP
Total population
Thus if a country’s GNP is $40,000,000 and its total population is 5,000, its per capita GNP
would be $8,000.
40,000,000 = 8,000
5000
Thus each citizen enjoys on an average $8,000 worth of goods and services.
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Impact of National Income on Standard of Living and Quality of Life
An increase in National Income is usually due to increased output of goods produced, increased
incomes or increased expenditure. These are all indicators of positive growth in the economy
hence giving an increase in the standard of living. If the incomes are not evenly distributed then
the standard of living of the population will be uneven. Additionally an increase in the incomes
of the population does not mean that their quality lives have improved as access to clean water,
health care and education may have received little or no investment.
1. Expenditure Method
• The total expenditure incurred by the society in a particular year is added together to get
that year’s national income.
• Components of Expenditure:
– personal consumption expenditure
– net domestic investment
– government expenditure on goods and services, and
– net foreign investment
C: Household spending
+ G: Government spending
- Depreciation
= National Income
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2. The Income Method: adding factor incomes
• The net income received by all citizens of a country in a particular year, i.e. total of net
rents, net wages, net interest and net profits. (GDP at factor cost).
• It is the income earned by the factors of production of a country.
• Add the money sent by the citizens of the nation from abroad and deduct the payments
made to foreign nationals (individuals and firms) (GNP at factor cost) or Gross National
Income (GNI).
Here GDP is the sum of the incomes earned through the production of goods and services. This
is:
= GNP
- Depreciation
= National Income
Only those incomes that come from the production of goods and services are included in the
calculation of GDP by the income approach. We exclude:
Transfer payments e.g. the state pension; income support for families on low incomes;
the Jobseekers’ Allowance for the unemployed and welfare assistance, such housing
benefit.
Private transfers of money from one individual to another.
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Income not registered with the Inland Revenue or Customs and Excise. Every year,
billions of pounds worth of activity is not declared to the tax authorities.
The market value of all the goods and services produced in the country by all the firms across all
industries are added up together.
GDP
+ Exports
- Imports
= GNP
- Depreciation
= National Income
• Process
– The economy is divided on basis of industries, such as agriculture, fishing, mining
and quarrying, large scale manufacturing, small scale manufacturing, electricity,
gas, etc.
– The physical units of output are interpreted in money terms
– The total values added up. (GDP at market price)
– The indirect taxes are subtracted and the subsidies are added. (GDP at factor cost)
– Net value is calculated by subtracting depreciation from the total value (NDP at
factor cost).
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Economic Growth and Development
Economic growth is the expansion of national income. The rate of expansion is usually
measured from one year to the next. Economic growth can be achieved if countries increase their
capacity to produce. It is a quantitative increase in production.
Negative Growth – This situation exists when there is a fall in productive capacity from one
period to another. It may also describe a failure of the economy to expand production.
Growth without Development- Economic growth can occur without development. While the
economy expands and the National Income increases the poverty and unemployment rates has
increased as well due to unequal distribution of income, corruption and fraud.
The long-term returns to investments in human capital such as; on the job training, coaching,
mentoring and e learning will reduce poverty.
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International Trade
International trade consists of exports and imports between countries, which should cause an
improvement in people’s living standards through the principle of comparative advantage.
Comparative advantage is the idea that countries benefit from specializing in the production of
goods at which they are said to be more efficient.
It is an advantage for countries to be self-sufficient, but there are reasons why trade must take
place between nations.
Absolute Advantage
The capability to produce more of a given product using less of a given resource than a
competing entity.
For example, consider again Country A and Country B. The opportunity cost of producing 1 unit
of clothing is 2 units of food in Country A, but only 0.5 units of food in Country B. Since the
opportunity cost of producing clothing is lower in Country B than in Country A, Country B has a
comparative advantage in clothing.
Thus, even though Country A has an absolute advantage in both food and clothes, it will
specialize in food while Country B specializes clothing. The countries will then trade, and each
will gain.
Absolute advantage is important, but comparative advantage is what determines what a country
will specialize in.
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Reasons for International Trade
Lack of certain natural resources to produce essential goods. Oil which is important to
economic life must be imported into countries that do not possess that natural resource.
Lack of capital, technology and specialist labour to manufacture certain goods on a large
scale. For example, Caribbean countries import machinery equipment and vehicle.
Differences in climatic conditions, e.g. many tropical countries import grapes and
strawberries as these produce need cool climates to survive.
Differences in the cost of production between countries. This reason is based on the
principle of comparative advantage which states that benefits will be gained from trade if
countries produce goods in which they have a relative advantage. Therefore, if two countries
both produce cars and coffee but each is more efficient at producing or produces either at a
lower opportunity cost either car or coffee, then trade can take place. The country that is
more efficient at producing coffee should put all its resources into coffee and import cars
from the other country that is efficient in producing cars.
To earn foreign exchange to pay for imports.
Promotes necessary political connections between countries
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REGIONAL AND GLOBAL BUSINESS ENVIRONMENT
1. Preferential trading area – a free trade area or trading bloc giving preferential access to
goods from different countries eg. Tariffs
2. Free trade area – a group of countries eliminate barriers between each other eg. Tariffs
and quotas and may have different policies with members outside the area eg. increased
tariffs.
3. Customs Union- free trade area with a common external tariff for non-members.
4. Common Market- a Customs Union with agreeing to adhere to the same product
regulations and freedom of movement of the factors of production. This is also called the
single market when licences, entry permits and taxes have been removed from trading.
5. Economic Monetary Union – a Single Market with a common currency.
6. Complete Economic Integration- final stage of economic integration; complete merging
of policy making with group decisions made on matters concerning all member countries.
A common market is an association of countries that have joined together to bring about the
harmonious development, continuous economic expansion and increased stability of the
countries involved. CARICOM was formed in July 1973 when Barbados, Trinidad and Tobago,
Jamaica and Guyana signed the treaty of Chaguaramas. Since then the following Caribbean
countries have joined: Antigua and Barbuda, Belize, Dominica, Barbados, Suriname, Grenada,
Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines and Bahamas and Haiti.
Associate members of CARICOM are Anguilla, Bermuda, British Virgin Island and Turk and
Caicos.
Objectives of CARICOM
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Impact on the Caribbean:
Allow for increased trade between Caribbean countries because of the removal of trade
restrictions such as quotas and tariffs.
Improved standard of living.
The CSME was established in 2006. It seeks to transform the common market into a single
market and economy. It was established to deepen the integration among Caribbean states and to
respond effectively to the challenges and opportunities globally.
Objectives of CSME:
The CDB is a regional financial institution. It finances regional projects that contribute to the
economic growth and development of the region. Sectors financed by the CDB includes:
infrastructure, tourism, mining and refining, agriculture, agriculture, manufacturing, health and
education.
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Impact on the Caribbean:
The aim of the World Bank is to reduce poverty worldwide. It therefore assists developing
countries by providing loans for projects such as housing, infrastructure and industry. The World
Bank provides long term loans for developmental purposes. It is used interchangeably with the
International Bank for Reconstruction and Development (IBRD). However, the IBRD is only
one of the five agencies of the World Bank.
The International Bank for Reconstruction and Development (IBRD) is a global development
cooperative owned by 189 member countries. As the largest development bank in the world, it
supports the World Bank Group’s mission by providing loans, guarantees, risk management
products, and advisory services to middle-income and creditworthy low-income countries, as
well as by coordinating responses to regional and global challenges.
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environmental consciousness, energy investments, healthcare, access to food and potable water,
and access to improved sanitation.
The OAS was established for the main purpose of increasing interdependence and solidarity, and
promoting regional co-operation and the peaceful settlement of disputes among the member
countries. These countries include: North and South America, Canada and the Caribbean.
The WTO is an international organization that monitors and regulates trade among the nations of
the world based on trade agreements by member states. The WTO replaces the General
Agreement of Tariffs and Trade (GATT).
Their main aim is to encourage the free flow of trade among nations.
discouraging unfair trading practices e.g. export subsidies and selling products below cost
to gain market share
settling disputes among members
environmental protection
monitoring and reviewing the trade policies
increasing trade
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International Monetary Fund (IMF)
The International Monetary Fund is an international organization that aims to promote global
economic growth and financial stability, to encourage international trade, and to reduce poverty.
Activities involve:
Surveillance
The IMF collects massive amounts of data on national economies, international trade, and the
global economy in aggregate, as well as providing regularly updated economic forecasts at the
national and international level.
Capacity Building
The IMF provides technical assistance, training and policy advice to member countries through
its capacity building programs. These programs include training in data collection and analysis,
which feed into the IMF's project of monitoring national and global economies.
Lending
The IMF makes loans to countries that are experiencing economic distress in order to prevent or
mitigate financial crises. Members contribute the funds for this lending to a pool based on a
quota system.
Allows for Caribbean states to access financing for further economic growth.
Improves economic growth
Increased institutional strengthening through capacity building and technical advice.
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Economic and Social Problems in the Caribbean
INDUSTRIALISATION
This refers to business activities such as production and manufacturing on a large scale. Major
heavy industrial activities in the Caribbean are in areas such as oil drilling, natural gas extraction
and bauxite. Problems involve: the disposal of industrial waste, reliance on primary production,
capital intensive nature of activities, high energy costs, and opportunity cost of investment in
these areas.
UNEMPLOYMENT
Globalization has contributed significantly to unemployment in the Caribbean. With the removal
trade barriers, some industries have not been able to compete globally. The lack adequate skills
that are required for the new industrial paradigm for example, information technology skills have
also contributed to the problem of unemployment.
A high level of unemployment among the young people of the Caribbean may result in various
social problems, as survival may depend on illegal activities.
Types of Unemployment
Disguised unemployment- a worker is working less than the amount of ours in a normal work
week and not seeking additional employment in the remaining hours
Seasonal Unemployment – Persons are employed only when the season for certain types of
economic activities comes around eg. During the Carnival Season.
Cyclical Unemployment- Unemployment that occurs as a result of the cyclical nature of the
economy. People are laid off during a depression or recessionary period. Unemployment is
reduced during periods of boom.
Structural Unemployment- Unemployment that occurs as a result of the long term changes in
the economy and results in decrease demand for a good or service eg. Movement away from
agriculture based production to tertiary production.
Frictional Unemployment- Unemployment that occurs as a result of the period of time between
one losing or leaving a job and subsequently finding one.
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Residual Unemployment- Unemployment that occurs as a result of persons not having the
capacity to undertake or engage in employment.
Population density Refers to the average number of people living on every square kilometre in a
country. The formula used for calculating population density is:
Very high population densities can indicate overpopulation. This occurs when the facilities in a
location, are not able to serve the number of persons in that location. This will cause heavy
competition for jobs, schools, health facilities etc. as well as reduction in the standard of living
and increased poverty and crime.
MIGRATION
Caribbean people migrate to first world countries in search of opportunities such as employment
and education. When skilled and professional workers migrate, Caribbean countries may
experience shortages in critical areas such as health care. Loss of skilled workers from industry
will also retard growth and development. Social problems may arise when children are left in the
care of grandparents and other relatives who have challenges to discipline them.
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URBANISATION
A situation where persons move from rural areas to settle in cities and towns. Problems occur in
that: The rural- urban drift results in fewer persons being left in rural communities. This reduces
the labour supply in those communities. Urban communities will tend to become overcrowded.
Develop policies and give incentives to owners to spread industries and businesses
throughout the country and not only concentrated in the towns and cities.
Develop infrastructure such as roads and water in rural areas.
Improve rural life to encourage persons to want to continue to live there.
Require persons who because of living in the rural areas have obtained training, to stay
and develop these areas.
Loan schemes for rural business owners.
DEBT BURDEN
This arises from a country’s borrowing to finance deficits. Eventually the country has to repay
the loan with interest and a substantial amount of revenue generated has to go towards financing
this loan from institutions such as the IMF and World Bank. Many Caribbean countries have
high debt- to-GDP ratios. This ratio is the amount of national debt of a country as a percentage
of its Gross Domestic Product. High debt-to-GDP can stifle an economy as a large portion of its
GDP is consumed in debt payment and very little is left for investment in the economy. A very
low debt- to- GDP ratio is desirable for economic growth and development.
While the Caribbean might be rich in certain natural resources such as bauxite, oil and gold the
region lacks other very important resources such as capital and entrepreneurial skills. Capital is
important as it increases production through the use of machinery, equipment and money
invested. The spirit of entrepreneurship is necessary for the creation of new business ideas and
entrepreneurship skills are important for the successful running of the businesses. FDI and
domestic savings can be utilized to raise the necessary capital.
Economic dualism occurs in countries where there exist two opposite economic sectors. One
sector is characterized by development, capital intensive industries, large scale farming and
technological advancement, and the other sector is characterized by subsistence farming, labour
intensive industries, handicraft industries and simple trading means of survival.
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Division in the economy is as follows:
Foreign Direct Investments refers to capital investments into factories, machinery and equipment
by a foreign company or an individual. FDI is important for the development of Caribbean
economies as they are challenged by their high debt- to-GDP ratios and increased global
competition for export earnings. Attracting foreign direct investment is a way for Caribbean
countries to obtain capital for growth and development.
Disadvantages
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Development of manufacturing sector
The manufacturing sector creates value added products which increases export earnings for
Caribbean economies. Developing the manufacturing sector therefore will impact on the
potential economic growth of a country.
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