Tuesday, April 10, 2012




Integration (from the Latin integer, meaning whole or entire) generally means combining parts so that they work together or form a whole. In information technology, there are several common usages:
1) Integration during product development is a process in which separately produced components or subsystems are combined and problems in their interactions are addressed.
2) Integration is an activity by companies that specialize in bringing different manufacturers' products together into a smoothly working system.
3) In marketing usage, products or components said to be integrated appear to meet one or more of the following conditions:
A) They share a common purpose or set of objectives. (This is the loosest form of integration.)
B) They all observe the same standard or set of standard protocol or they share a mediating capability, such the Object Request Broker (ORB) in the Common Object Request Broker Architecture (CORBA).
C) They were all designed together at the same time with a unifying purpose and/or architecture. (They may be sold as piece-parts but they were designed with the same larger objectives and/or architecture.)
D) They share some of the same programming code.
E) They share some special knowledge of code (such as a lower-level program interface) that may or may not be publicly available. (If not publicly available, companies have been known to sue to make it available in order to make competition fair.)

In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership, but also into one corporation (as in the 1920s when the Ford River Rouge Complex began making much of its own steel rather than buy it from suppliers).
Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly.
Nineteenth-century steel tycoon Andrew Carnegie introduced the concept and use of vertical integration[1]. This led other businesspeople to use the system to promote better financial growth and efficiency in their businesses.

Three types

Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers. Contrary to horizontal integration, which is a consolidation of many firms that handle the same part of the production process, vertical integration is typified by one firm engaged in different parts of production (e.g. growing raw materials, manufacturing, transporting, marketing, and/or retailing).
There are three varieties: backward (upstream) vertical integration, forward (downstream) vertical integration, and balanced (both upstream and downstream) vertical integration.
  • A company exhibits backward vertical integration when it controls subsidiaries that produce some of the inputs used in the production of its products. For example, an automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product. It was the main business approach of Ford and other car companies in the 1920s, who sought to minimize costs by integrating the production of cars and car parts as exemplified in the Ford River Rouge Complex.
  • A company tends toward forward vertical integration when it controls distribution centers and retailers where its products are sold.




1 The Dhaka Stock Exchange is doing well Grameenphone, the biggest mobile (cell) phone company in Bangladesh with over 21 millioncustomers, decided in 2009 that it needed more finance to develop its services. To help Generate this finance, Grameenphone announced its intention to raise US$70 million through selling additional shares. Grameenphone is a multi-national company which is owned by Telenor, a Norwegian telephone company, and Grameen Telecom, a non-profit company founded by Muhammad Yunus. Muhammad Yunus, who is a pioneer of microfinance, also founded the Grameen Bank which provides loans to people, such as village entrepreneurs, who find it difficult to obtain finance from traditional sources. The Stock Exchange in Dhaka, the capital of Bangladesh, has 284 companies listed and the value of these companies more than doubled between 2007 and 2009. The value of these companies is now equivalent to approximately 16% of Bangladesh’s Gross Domestic Product. The opportunity to buy shares in Grameenphone will further increase the value of the Dhaka Stock Exchange. The Bangladesh Government has offered financial incentives to multi-national companies to encourage more of them to locate in Bangladesh.
Answer the following
(a) Explain what is meant by an entrepreneur.
(b) Describe the role that a stock exchange can play in a country’s economy.
(c) Identify two possible reasons why the supply of mobile (cell) phones may increase.
(d) Explain two financial incentives, other than subsidies, which a government might offer multinational companies to locate in its country.
(e) Discuss whether a multi-national company which locates in a country will always be
advantageous to that economy.

Living standards


7 The living standards of people vary enormously and yet it is not always easy to measure these with great accuracy. It is, however, certainly the case that some countries suffer from extreme poverty.
(a) Describe how living standards in a country can be measured.
(b) Explain two reasons why the measurement of living standards in a country is not always
(c) Discuss the actions a government might take to reduce poverty.

Mixed economies
Definition of 'Subsidy'
A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public. Politics play an important part in subsidization. In general, the left is more in favor of having subsidized industries, while the right feels that industry should stand on its own without public funds. subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare.

Answer this question.
2 One feature of many mixed economies is that governments may intervene by giving subsidies to some producers.

(a) What is meant by a subsidy?
(b) Explain, using a demand and supply diagram, how a subsidy can affect the equilibrium price
and equilibrium quantity in a market.
(c) Identify the three questions faced by every type of economic system.
(d) Discuss why virtually every country today has a mixed economy.

Demand- price elasticity of demand-
Price elasticity of demand is the quantitive measure of consumer behavior that indicates the quantity of demand of a product or service depending on its increase or decrease in price. Price elasticity of demand can be calculated by the percent change in the quantity demanded by the percent change in price.
Price elasticity of demand is determined by the price of the item or service, availability of alternative goods, amount of time being measured, consumer income and whether the item or service is considered to be a necessity or a luxury. Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.
Price elasticities are almost always negative, although analysts tend to ignore the sign even though this can lead to ambiguity. Only goods which do not conform to the law of demand, such as Veblen and Giffen goods, have a positive PED. In general, the demand for a good is said to be inelastic (or relatively inelastic) when the PED is less than one (in absolute value): that is, changes in price have a relatively small effect on the quantity of the good demanded. The demand for a good is said to be elastic (or relatively elastic) when its PED is greater than one (in absolute value): that is, changes in price have a relatively large effect on the quantity of a good demanded. 

3 Firms are keen to know what influences consumers in their buying decisions. Publishing firms in India have researched why people buy particular magazines and have found that the price elasticity of demand for different magazines varies.

(a) Describe the factors that can affect the demand for a product.
(b) Explain what is meant by price elasticity of demand.
(c) Discuss how knowledge of the price elasticity of demand for magazines may be used by a
firm which produces and sells magazines.

Trade union
Unions" redirects here. For the defunct Australian rules football club, see Unions Football Club.
"Labour union" redirects here. For the Polish political party, see Labour Union (Poland). For the Canadian political party, see Union Labour.
Labour union demonstrators surrounded by soldiers during the 1912 Lawrence textile strike in Lawrence, Massachusetts.A trade union (British English), labour union (Canadian English) or labor union (American English) is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members (rank and file members) and negotiates labour contracts (collective bargaining) with employers. The most common, but by no means only, purpose of these organisations is "maintaining or improving the conditions of their employment"This may include the negotiation of wages, work rules, complaint procedures, rules governing hiring, firing and promotion of workers, benefits, workplace safety and policies. The agreements negotiated by the union leaders are binding on the rank and file members and the employer and in some cases on other non-member workers

4 Deciding on an occupation is difficult for some individuals. There are so many factors that need to be taken into consideration. One of these is whether or not there is a trade union they can join.
(a) Describe the factors, other than possible membership of a trade union, which can affect an
individual’s choice of occupation.
(b) Is it always true that individuals are paid more as they get older?
(c) Explain the benefits that an individual may get from being a member of a trade union.
(d) Discuss whether trade unions always have a harmful effect on the wider economy.

5 The size of firms in the United Arab Emirates can vary enormously, from very small sole proprietor businesses to very large public limited companies.
(a) Describe the disadvantages of a sole proprietor business.
(b) Explain why a private limited company might wish to become a public limited company.
(c) Explain how firms can grow in size.
(d) Discuss whether some large firms might benefit from reducing their size.
In economics, increases in the level of prices. Inflation is generally thought of as an inordinate rise in the general level of prices. Four theories are commonly used to explain inflation. The first and oldest, the quantity theory, promoted in the 18th century by David Hume, assumes that prices will rise as the supply of money increases. Milton Friedman refined the quantity theory in the mid-20th century, arguing that the prescription for stable prices is to increase the money supply at a rate equal to that at which the economy is expanding. inflation occurs when the demand for goods and services is greater than the supply. It calls for the government to control inflation by adjusting levels of spending and taxation and by raising or lowering interest rates. A third approach is the cost-push theory. It traces inflation to a phenomenon known as the price-wage spiral, in which workers' demands for wage increases lead employers to increase prices to reflect their higher costs, thereby sowing the seeds of a further round of wage demands. A fourth approach is the structural theory, which emphasizes structural maladjustments in the economy, as when in developing countries imports tend to increase faster than exports, pushing down the international value of the developing country's currency and causing prices to rise
6 Many governments are concerned about inflation in their economies. This was, for example, a particular problem in Zimbabwe where there has been a very high rate of inflation.
(a) What is meant by inflation?
(b) Describe how a retail (consumer) price index is calculated.
(c) Explain what is meant by demand-pull inflation.
(d) Discuss whether a government should be concerned about a high rate of inflation in its


Takeover of privately owned corporations, industries, and resources by a government with or without compensation. Common reasons for nationalization include  prevention of unfair exploitation and large-scale labor layoffs,  fair distribution of income from national resources, and to keep means of generating wealth in public control

Bottom of FormGenerally speaking nationalization means the control of industries by the state. When a Government takes under its control as owner any privately run business, then this act is known as the act of nationalization.The state becomes the owner of the nationalized concern. The State and the Government become responsible for the loss and the profit of the nationalized business. A few years ago, in our won country, life insurance business was nationalized. Then fourteen banks were nationalized. Bus services on different routes have also been nationalized. Many other industries and business concerns, including coal mines, have also been taken over by the Government.Some people are against nationalization. They say that by nationalization, the Government takes away the right of the citizens to do any business which they think themselves to be capable of. This is against the spirit of democracy. But it is not so. Nationalization ad democracy can go hand-in-hand. They are not opposed to each other.Nationalization has become the economic creed of modern times. Its advantages are many. First, private ownership of big industries and business concerns gives rise to two classes. On the one side, there re big capitalists who own, manage and control the firms and the mills. On the other, are the poor laborers. The capitalists become richer while the poor laborers grow poorer. Nationalization removes exploitation. It reduces inequalities. The distribution of wealth becomes uniform and just.
Secondly, under private ownership competition is very keen. Thus, big and powerful capitalists try to crush their small rivals. This is against national interest. Nationalization curbs unhealthy competition and checks corruption.There are certain basic industries which must not be left in the hands of private persons. They must be run by the Government. Production of arms and ammunition, atomic energy, public utility services like railways, electricity, oil and natural gas, waterworks and aviation, etc., are some such industries. In such production works, the service of the public is the main motive and not the earning of profits. We are sorry to note that a number of public sector undertakings are not doing commendable work. There are to-day a number of autonomous corporations, and they have not succeeded in increasing production. They are incurring heavy losses. They must face stiff competition from private enterprises so that their efficiency may be increased. The spirit of competition is of great good to the nation. All is not good with nationalization. If the state begins to nationalize different business concerns from time to time, it kills private enterprise. Private persons do not invest in new industries lest they be nationalized. Further, with gradual nationalization, the state begins to acquire greater and greater control over the life of the people. In the long run this leads to complete centralization of economic power in the hands of the state. This means bringing in dictatorship form the back door.
It should also be kept in mind that many of the privately owned concerns have only worn out and outdated machinery. Hence to nationalize such industries is not profitable. So new industries should be established instead of taking over the old ones. The public sector should be enlarged and strengthened, but the private sector must also be encouraged and helped to tide over the crisis which it may be facing.

The main arguments for and against nationalization of banks are as under:-

1. Creation of industrial and business monopolies. The advocates of nationalization of banks argue the concentration of banks credit in a few hands leads to the creation of industrial and business monopolies which is very harmful to the interest of the nation.
The opponents of nationalization assert that the issue of nationalization of banks should not be guided by emotions. Who can deny this fact that concentration of credit in a few hands leads to rapid industrial, agricultural and .commercial progress.

2. Fair Distribution of Credit. The nationalization of banks checks the concentration of credit in bigger account. It also ensures better distribution of credit and also meets the claim of social justice.
Those who oppose the nationalization of banks argue that fair distribution of credit and goals of social justice cannot be attained by nationalization of banks. Instead of nationalizing the bank, they say, the central bank should have effective control over the banks so that credit is properly disposed of.
3. Financing of Agriculture Sector. Nationalization of banks is also advocated on the ground that it enables the state to give liberal credit to agriculture sector which is the backbone of most of the developing countries.
On the other side the argument given is that nationalization of banks will not solve the problem of agricultural credit. The villages they say are scattered in wide areas. The farming units are small and large in number The loan agencies cannot effectively deal with farmers who are mostly illiterate. The banks cannot take the risk of advancing loans by mortgaging land and standing crops as it leads to many legal and practical difficulties.
4. Credit needs of small industrialists. A forceful argument advanced in favour of nationalization of banks is that with nationalization the credit needs of small industrialists (for short medium and long term loans) can be adequately met who are generally neglected.
There is a force in the above argument. The practical difficulties which arise in the advancing of loans to small industrialists are (1) that it is difficult to asses the credit worthiness of the small borrowers (2) The managers lack managerial capabilities (3) The industrialists provide no security for safe return of money (4) They prefer to indulge in litigation. They are mostly technically unqualified, etc.
5. Mobilization of resources. Nationalization of banks, it is claimed encourages and stimulates mobilization of saving in the country. The above argument is rebutted o the ground that banks in private hands can raise and do obtain sufficient funds by borrowing from the people.
6. Service motive. Nationalization of banks is also supported on the ground that it replaces the commercial motive by the spirit of service. The private banks are geared for making profits for their shareholders and directors only. The above argument is not tenable. The bank in private hands keep the twin objectives of profit and service side by side.
7. Commercial approach. Another point advanced in favour of nationalization is that private banking system is completely run on commercial basis t e on consideration of profits. The social interest is ignored and national gain is sacrificed. The above arguments is rebutted on the ground that private sector no doubt works for profit it however earns profits by efficiently pursuing minimum operational cost approach.
8. Level of efficiency. Nationalization of banks is also advocated on the ground that the level of efficiency in the state owned banks is considerably improved. Efficiency is not to be judged by the margin of profit alone If the banks are able to provide credit to new entrants in the industry loan is advanced according to national priorities the banking efficiency is said to be high.
Those who oppose the nationalization of ban say that as t e banks pass into the State these are based with twin dangers of overcentralized control and over bureaucratization, redtapism, nepotism, favouritism and unnecessary delay in the advancement of loans creep into the banking system. This retards the economic development in the country.
9. Holding of price line. Another advantage claimed of nationalization is that the central bank with the help of nationalized banks can minimize the fluctuations in economic activities. It can hold the price line by not financing in speculation, hoarding and other ahtisocial activities. The advantage given above is not convincing. The fluctuations is economic activities are caused mainly by unrealistic fiscal measures and ill conceived economic policies.
10. Rate of economic growth. Nationalization of banks is advocated on the ground that with the take over of banks, the financial resources of the state are considerably increased. The state is -then in a position to undertake short and long term projects for increasing the rate of economic growth with certainty. The argument looks convincing on the face of it. Yet it crumbles when it is examined in the light of experience gained by nationalization of banks. The increase in income of the state due to nationalization is -mostly diverted to unproductive channels and this has leads to the rise in the price of the commodities.
11. Abolition of malpractices. The case for nationalization of banks is also advanced on the ground that the malpractices of private owned banks like that of unlawful transactions, evasion of foreign exchange, heavy advances to directors and to their near and dear ones, evasion of taxes etc.- will altogether stop.
This merit of nationalization of bank is also not very convincing. If past experience is any guide to us, the malpractices in the state owned banks like that of favouritism, nepotism bureaucracy, proverbial delay in taking timely action, corruption, bad debts etc., are more serious.
12. Security to depositors. It is said that the money lying in private banks is not safe. The nationalization of banks provides the much needed security to the depositors.
No body can deny that the money lying in the s-ate vaults of the state is safe and secure. However, the central bank of country can provide security and give legal cover by having a strict control over the private owned banks.
13. Wasteful competition. The private banks in order to attract customers spend huge among on constructing prestigious buildings, lavishly furnish offices, make the building centrally air-conditioned, etc. The huge waste of money and energy can be avoided if banks are owned by the state.
The argument advanced against this is that the competition is an essence of private enterprise. If the banks spend large amount on erecting sky high buildings, they recover the amount on renting out the major portion of the building to the various firms in due course of time. Moreover, every bank has its own unique way for providing service to its customers. Let not the initiative and enterprise be curbed by nationalization of banks.
Summing up, the objectives of nationalizing the banks in the past over three decades have not been achieved. Favouritism, nepotism malpractices have ruined the commercial banks. The total amount of stuck up loans of bank and development financial institutions is mounting up. The nationalized banks are again being privatized and the Government is permitting the establishment of new banks in the private sector.

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