COVER SHEET

Qualification Module number and title

Cardiff Metropolitan University Level 4

and 5 Higher Diploma in Business
SRI4158 - Business Economics
Management
Student name Assessor name
K.H.Tharindu Dhananjaya Ms. Dushmanthi Ratnayake
ICBT=NG/HDBM/CMU/04/10
CMU=st20213605
Date issued Completion date Submitted on
2022.07.24 To be informed

Assessment type Duration/Length of Weighting of Approximate Date of

Assessment Assessment Submission
1500words 100%

Learner declaration

I certify that the work submitted for this assignment is my own and research sources are fully
acknowledged.
Student signature: Tharindu Dhananjaya Date: 2022.07.24

Marks awarded
First assessor

Second assessor

Agreed grade

IV Signature Date

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ASSIGNMENT FEEDBACK

First assessor feedback

Assessors name & Date

signature

Second assessor feedback

Assessors name & Date

signature

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ACKNOWLEDGEMENT

In the completion of this assignment successfully, it required a lot of hard work and
dedication. Moreover, it will not be possible without the guidance and support provided by
many individuals. I would like to express my deep appreciation particularly for the following.
First of all, I would like to convey my gratitude to Ms.Dushmanthi Ratnayake for the
immense support and guidance provided in completing this assignment successfully.
Moreover, I would like to convey my gratitude to my parents and my friends who shared
their support, either financially, morally and physically.

Thank you.

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TABLE OF CONTENT

ACKNOWLEDGEMENT............................................................................................................................3

TABLE OF CONTENT...............................................................................................................................4
LIST OF TABLES......................................................................................................................................5
LIST OF FIGURES....................................................................................................................................5
1) Task 1 - PPC & Comparative Advantage.............................................................................................6
1.A) PPC Drawing...............................................................................................................................6
1.B) Comparative advantage..............................................................................................................6
2) Task 2 - Monetary Policy To Control Inflation....................................................................................7
3) Task 3 - Four Market Models.............................................................................................................8
4) Task 4 - Significant Of International Trade To Sri Lanka...................................................................11
REFERENCES.........................................................................................................................................13
PLAGIARISM REPORT...........................................................................................................................14

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LIST OF TABLES

Table 1 - Information for PPC Drawing................................................................................................6

Table 2 - Types of market systems according to competition level.......................................................9

LIST OF FIGURES

Figure 1 - PPC Drawing.............................................................................................................6

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 1) Task 1 - PPC & Comparative Advantage

1.A) PPC Drawing

Maximum USA (A) China (B)

Outputs
Computers 6 5
Rice 2 1
Table 1 - Information for PPC Drawing

Figure 1 - PPC Drawing

1.B) Comparative advantage

In here, United States of America has the absolute advantage when it come to producing both
products using only labor as an input, When discuss Computer producing it has comparative
advantage too because USA is relatively better at producing them. USA is 2 time better at
Rice.

USA have greatest advantage and the widest gap lies with Rice production, hence USA
should specialize in producing Rice.

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 2) Task 2 - Monetary Policy To Control Inflation

The Central Bank normally conducts monetary policy in line with a flexible inflation
targeting (FIT) framework (Economic and Price Stability, 2022). Goods become more
expensive quicker than anticipated, monetary policy will tighten by raising and increasing
interest rates or implementing and monitoring other aggressive actions. Higher interest rates
lead to increase the cost of borrowing, which ultimately reducing either spending and
investment projects, which together depend largely on borrowing. Similarly, if inflation and
country’s good production decrease or reduce, owner interest rates make borrowing more
affordable, as can a variety of other potential policy options.

Adjustments in the monetary base are regarded as the key causative variables influencing
price stability In principle, while assessing financial dynamics, Two basic meanings of
monetary aggregates are taken into account. The first is reserve money, which consists of
Central Bank issued money and commercial banks holdings well with central bank. It’s also
known as base money, because commercial banks may make deposits depending on reserve
money, and that is a piece of a comprehensive meaning of money supply, as part of their loan
and reserve creation process. The next is wide finance, which is related to the amount of
public currency plus public deposits with commercial bank. According to research, the wide
money supply is the most relevant monetary measure for analyzing the link between both the
supply of money and the overall price level. Nevertheless, with increasing volatility in the
money multiplier and velocity, as well as a softening connection between inflation level and
money supply, the position of financial aims as a benchmark rate became unknown,
complicating the Central Bank’s communication plan and forcing it to enhance its monetary
policy.

The goal of rising prices is to keep prices stable. All monetary policy tools, including open
market operations and discounted borrowing, can be implement and used in an overall
inflation-controlling approach. Inflation targeting deviate from tactics aimed at other
indicators of economic performance, including such currency movements, rates of
unemployment or the rate of nominal GDP growth.

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 3) Task 3 - Four Market Models

Perfect Competition, supply & demand factors influence the volume and size of services and
products produced, along with market pricing processes established by participants (Zeder,
2020).

Monopolistic Competition, the least potential cost of manufacturing is not assumed. That
minor charge in description allows for significant change and variances in whether the firms
function in the market. Corporations with a monopolistic Competition system provide
extremely identical services and products with minor variances and differences which serve
as the foundation or base for their marketing and promotion. In this model high number of
small sellers sell very much similar goods. Cap’n Crunch, Apple Jacks are example for this
type of market structure (Zeder, 2020).

Monopoly and perfect or totally competitive marketplaces normally at opposite ends or side
of the market structure spectrum. In here few corporations or organizations dominate the
entire market place. In monopolistic marketplaces, where there are numerous or many rivals
and competitors, however in this monopoly system, there is only one vendor. In monopoly
structure organization tend to do anything which lead to their profit maximization and set the
price margins because monopoly firms know their is no on one to compete with them due to
high entry barriers. (Gitman et al., n.d.).

Oligopoly not every business aspires to be a solitary structure in a metropolis. Companies

that cooperate or work together to reduce competition and control a distinct market or sector
form oligopolies. Companies operating within oligopolistic market arrangements might be
tiny or huge. However rather then compete these organizations set agreements to collaborate
with each other. By setting these kind of arraignments lead to increase the market power and
profit. Nevertheless, the corporations normally this much tough frequently have patents, cash,
liquidity and physical resources to build and create hindrance for entry level new enterprises
(retail-insider, 2021).

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Basis Perfect / Total Monopoly Monopolistic Oligopoly
Competition Competition
Number of Extremely Solitary Huge Several High
sellers of goods High
and services
Product Homogeneous No Similar Closely linked Homogeneous in
Characteristics Products but varied Pure Oligopoly
and varied in
Distinguished
Oligopoly
Firm Access and Liberty of Access new Liberty of Limitations on
Exit Access enterprises & Access new company
depart old ones in admission
constrained
Demand Curve Extremely Downgrade Slant Downgrade Indeterminate
Pliable Slant
Pricing Every business Every Company Partly price Exactingness
is a price-taker is a price-maker ceiling owing to due to fear of a
& Price Gouging product variety price
is conceivable competition
Cost of Good No Selling Just informational Large Selling Massive Selling
Cost Selling Cost Cost Cost
Knowledge Ideal Inadequate Inadequate Inadequate
Level Knowledge Knowledge Knowledge Knowledge
Example Personal Care Sri Lankan Restaurants Television
Products Railway
Table 2 - Types of market systems according to competition level

(Gitman et al., n.d.)

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Like above table, market systems are classified into 4 types according to competition level.,
such as pure competition, monopolistic, oligopoly, and monopoly. Pure competition render a
system in which a lot of the smaller firms or companies battle with identical and similar
items. Conversely monopolistic competition relates to a market dynamic in which a lot of the
smaller organizations or enterprises battle with each other selling similar products however
which are having slight variances and differences. An Oligopoly is a structure of market
which is having limited or small number of enterprises competes or collaborate with each
other. Finally, a monopoly is a market structural arrangement in which a single or one
business lead and dominates the whole entire market.

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 4) Task 4 - Significant Of International Trade To Sri Lanka

Sri Lanka’s Foreign currency reserves are nearly depleted. For its first point in recorded
history, it lost to pay the balance on its external debt this year. The government blames the
Covid epidemic, which harmed Sri Lana’s tourism business, that is one of the country’s
largest foreign currency earnings. It further claims that a string of devastating terrorist
assaults on churches in 2019 have scared visitors away. Some specialist, believe that
economic incompetence is to responsible. By March 2020, this had dropped to &1.93 billion
and the government said that it only has &50 million remaining (Desai, 2022).

The government also has amassed massive debts with nations like as China (Chung, 2022) in
order to support what opponents call needless construction projects. Among the International
Trade theories, Absolute advantages, comparative advantage and etc.

The Civil war which lasted for 26 years had a tremendous influence on the foundations of Sri
Lanka’s domestic economy The 2008 global financial crisis depleted the country’s currency
reserves, and financial failure by successive administrations resulted in the dual difficulties of
budget shortfalls and Balance of Payments deficits. The country’s rising foreign
indebtedness, combined with increased government expenditure to implement COVID-19
alleviation efforts, have fundamentally damaged the local economy. Sri Lanka is a textbook
example of the ‘twin deficits’ idea, which stated that an economy’s current account develops
in the same path as its fiscal account.

The theory of absolute advantages arose in response to the protectionism mercantilist ideas
on global commerce. It argued that free trade was the only way to ensure trade expansion.
And the country must only develop things in which it has a clear edge. International divide
was facilitated by free trade. Producers with differing relative advantages could always obtain
a benefit over producers in distance via specialization and division of labor. It underlined the
important of manufacturing what a country specializes in order to create more at a lesser cost
than other countries. According to this theory, a country must be exporting a commodity for
which it has a competitive edge (saylordotorg, n.d.).

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Miscellaneous manufactured articles, manufactured goods classified chiefly by materials,
food and live animals and machinery and transport equipment are the 4 main export
categories in Sri Lanka (Hettiarachchi, 2018). The main goods with a comparative advantage
in SL are Tea and mate, vegetable textile fibers, spices, meal and flour of wheat and flour of
meslin, and women’s or girls’ knit or crochet garments. The findings highlighted that tea and
mate provide the most to SL export income, but their TBI value is insignificant. This implies
that, while tea and mate do not generate considerable foreign money, they may fight in the
world market All through the research period, export and imports of electric power
machinery, ships, boats and motor cycles are less than unity. Also after 35 years of freedom,
the framework of SL exports and hence its economy is indeed a long way off.

Sri Lanka can improve its competitiveness and specialization in the export of Vegetables
planting materials, woven, fruit, vegetable products and also food preparations. If wood pulp,
and fibrous cellulose material Sri Lanka has did lost its export specialization and
competitiveness in plaster, asbestos, Stone, mica, cement, carpets and other textile floor
coverings, bird skin, ceramic products, copper and articles, feathers, human hair, artificial
flowers and pearls. If Sri Lanka’s export department concentrated in these type of export, we
can able to bridge the Balance of Payment deficit gap in near future.

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REFERENCES

 Cbsl.gov. 2022. Economic and Price Stability. [online] Available at:

<https://www.cbsl.gov.lk/en/monetary-policy/about-monetary-policy> [Accessed 20 June
2022].
 Desai, P., 2022. Sri Lanka: Why Is The Island Country In An Economic Crisis?. [online]
Globalgyan.substack.com. Available at: <https://globalgyan.substack.com/p/sri-lanka-
why-is-the-island-country> [Accessed 15 June 2022].
 Gitman, L., McDaniel, C., Shah, A., Reece, M., Koffel, L., Talsma, B. and Hyatt, J.,
n.d. Competing in a Free Market. [online] Opentextbc.ca. Available at:
<https://opentextbc.ca/businessopenstax/chapter/competing-in-a-free-market/> [Accessed
19 June 2022].
 Hettiarachchi, H., 2018. Revealed Comparative Advantage: An Analysis Based on Leading
Exports of Sri Lanka. [online] Pgihs.ac.lk. Available at: <http://pgihs.ac.lk/reserch/1/Paper
%203%20Revealed%20Comparative%20Advantage-analysis%20based%20on%20leading
%20Exports%20of%20Sri%20Lanka.pdf> [Accessed 21 June 2022].
 Zeder, R., 2020. The Four Types of Market Structures - Quickonomics. [online]
Quickonomics. Available at: <https://quickonomics.com/market-structures> [Accessed 21
July 2022].
 Retail-insider. 2021. The Four Types Of Markets and Structures. [online] Available at:
<https://retail-insider.com/articles/2021/08/the-four-types-of-markets-and-structures/>
[Accessed 14 July 2022].
 saylordotorg, n.d. What Is International Trade Theory?. [online] Saylordotorg.github.io.
Available at: <https://saylordotorg.github.io/text_international-business/s06-01-what-is-
international-trade-th.html> [Accessed 14 July 2022].
 Chung, D., 2022. Sri Lanka Faces Unsustainable Debt and Balance of Payment
Challenges. [online] worldbank.org. Available at:
<https://www.worldbank.org/en/news/press-release/2022/04/13/sri-lanka-faces-
unsustainable-debt-and-balance-of-payment-challenges> [Accessed 19 July 2022].

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PLAGIARISM REPORT

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