EXTERNAL FACTORS

POLITICAL ENVIRONMENTAL TRADE LEGAL EXTERNAL FACTORS PELT TAXES TOTAL BAN ZONING SAFETY STANDARDS POLITICAL GENERAL ECONOMIC POLICIES TAXES SUBSIDIES ENVIRONMENTAL CONSERVATION POLLUTION EVIRONMENTAL DANGERS TRADE TARIFFS QUOTAS

POLITICAL FACTORS GENERAL ECONOMIC POLICIES: Govt. Policies vary during business cycles. When it’s boom time, the interest rates are increased to control inflation and during recession the opposite happens. TAXES: The taxes that affect the companies are GST, Excise Duties, and Company Tax. An increase in any of these taxes will reduce production. SUBSIDIES: Payment by Government to help producers to reduce the cost of production, and thus increase output and reduce the price to consumers. Subsidies will always result in increase in supply

ENVIRONMENTAL FACTORS PREVENTION OF ENVIRONMENTAL DAMAGE: any production process which causes damage to the life cycles of protected species of bird, animal or marine life, will not be permitted. This affects the supply. CONSERVATION MEASURES: These measures are taken to protect what is left eg banning native logging on public land. Rules are brought in to reduce or recycle waste products or install special equipments to prevent discharge of toxicwastes to achieve the above objectives. All these measures result in higher costs of production.

LEGAL FACTORS WHAT? WHERE? HOW? ‘WHAT’ – TOTAL BANS: Demerit goods or harmful goods are sometimes banned, which impacts on supply. WHERE? – ZONING LAWS: These laws determine the type of activities allowed in certain areas. Such regulations will affect the supply when cost of compliance is added on. HOW? – SAFETY STANDARDS: Govt. can influence how goods & services are produced. For example improving safety of workers or fitting safety devices in machines; rest period for commercial drivers; bright coloured clothing etc. They all result in increase in costs of production.

TRADE RESTRICTIONS Overseas Governments impose restrictions to protect their local industries. Such protections impact on the supply of NZ EXPORTERS: TARIFFS: These are taxes on imported goods. It makes the imported goods more expensive, thus helping local producers. QUOTA: These are restrictions on the quantity of goods allowed into a country. This will cause the supply of exporters to fall.