CQ 2: Are small businesses or large businesses most important in economics?

8 important questions on CQ 2: Are small businesses or large businesses most important in economics?

What is efficient acces to credit? (2)

  1. Low costs to register a property
  2. Higher credit information availability

What is rigid labor regulations? (3)

  1. Difficulty of hiring
  2. The rigidity of working time
  3. The difficulty of firing

What is an informal entrepreneur?

Those who start a business or are the owner/manager of a business who engage in monetary transactions not declared to the state for tax, benefit and/or labour law purposes when they should be declared but which are legal in all other respects
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What can governments do about SME's in the informal economy?

  • Do nothing
  • De-regulate formal entrepreneurship
  • Eradicate informal entrepreneurship
  • Formalize informal entrepreneurship

What happens when the government does nothing?


Leaves intact the negative impacts on formal businesses
- Unfair competition
Employees and customer
- No guarantee that health and safety standards are maintained
Governments/population
- Taxes owed are not collected

What happens when the government de-regulates formal entrepreneurship?

Results in a leveling down rather than up of working conditions

What happens when the government eradicates informal entrepreneurship?

Governments repressing precisely the enterprise culture that they may wish to nurture

What happens when the government formalises informal entrepreneurship?

From both supply and demand side

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