External Influences On Business Activity (AL)

Question 1

Privatisation

Answer 1

Change in ownership of state owned enterprises to investors private sector

Question 2

Nationalisation

Answer 2

Transfer of private ownership to state ownership

Question 3

Benefit and limitation of privatisation

Answer 3

Benefit
-Greater efficiency
-Decision making in state ownership is slow
-Decisions are taken for business reasons and not political
-Sale of nationalised firm can raise finance for govt.

Limitation
-Firm does not act in favour of shareholder and not society
-Exploits consumers with high price
-Private firms are unlikely to follow policies for benefit of country
-Public firms are more accountable to country