Open University of Mauritius

CEMBA [OUpm003]
CEMPA [OUpm004]
MBA GENERAL [OUpm05]
MBA SPECIALISATION [OUpm006]
MBA EDUCATIONAL LEADERSHIP [OUpm007]

EXAMINATIONS FOR: May/June 2016

MODULE: C5 Economic Environment of Business

[OUpm0031103/OUpm0041103/]
OUpm0051103/OUpm0061103/ OUpm0071103]

DURATION: 3 HOURS

READING TIME: 15 Minutes

INSTRUCTIONS TO CANDIDATES:

1. This Paper consists of Section A and Section B.

2. Section A is Compulsory.

3. Answer any THREE Questions from Section B.

4. Always start a new question on a fresh page.

5. Total marks: 100

This question paper contains five questions and 3 pages.

Page 1 of 3
 SECTION A: COMPULSORY

QUESTION 1: (25 MARKS)

Case study on Unemployment

Unemployment is typically associated with labour i.e. employees who make themselves
available for employment not being able to find work. However, it can also be applied to
other factors of production such as capital e.g. machinery.

Unemployment varies with the level of economic activity. In early 2004 employment in the
UK was high, so that unemployment figures were low - about 4.5 with employers reporting
skill shortages in a number of areas and trades.

There are many explanations of how unemployment is caused. One cause of

unemployment may be downswings in the trade cycle, i.e. periods of recession.

Another explanation of wide-scale unemployment refers to structural employment.

Structural unemployment arises from longer-term changes in the economy, affecting
specific industries, regions and occupations. Structural unemployment often explains
regional unemployment. Some regions of the UK such as Central Scotland, and the
North-West have higher rates of unemployment because the traditional heavy industries
which located there have gone into decline as they are replaced by cheaper imports from
abroad. The new high-tech industries based on new technologies tend to be based in the
South-East and along particular growth corridors.

Other people argue that new technology is a cause of unemployment i.e. technological
unemployment. The argument is that the introduction of new technology is destroying jobs
and trade while at the same time imports from low-wage developing countries are
undercutting goods produced in this country.

However, a number of studies contradict this. New technology generates new products,
new services and therefore new jobs. Fewer workers may be required in some production
processes where specific tasks are taken over, but rising productivity boosts incomes and
the demand for new jobs in the economy as a whole.

Source:http://businesscasestudies.co.uk/business-theory/externalnvironment/
unemployment.html#ixzz475f8I213

Carefully study the above case and answer the following questions: -

(a) Identify the type of employment discussed in the case highlighting the various
types of unemployment (15 marks)

(b) Explain how public policy can be used to deal with them effectively. (10 marks)

Page 2 of 3
 SECTION B

ANSWER ANY THREE (3) QUESTIONS

QUESTION 2: (25 MARKS)

Using the concept of kinked demand curve model, discuss the characteristics and
behaviour of firms in an oligopolistic market.

QUESTION 3: (25 MARKS)

Using appropriate examples, explain the concept as well as the types of inflation,
highlighting its impacts on an economy.

QUESTION 4: (25 MARKS)

“International trade will always assume an important role for any country in the world”.
Discuss this statement stressing on the protective policies that are generally used by
countries.

QUESTION 5: (25 MARKS)

Using the knowledge of PEST analysis, explain as to how it can be used to devise a
strategic approach to your business activities.

Page 3 of 3