c) Constraints

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Last updated 6:31 PM on 5/3/26
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5 Terms

1
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  • state the constraints on business growth

  • market size

  • access to finance

  • owner objectives

  • regulation

2
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  • explain how market size constrains business growth

  • less marketing

  • weaker branding

  • low product diversification → less customers

3
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  • explain how access to finance constrains business growth

  • greater perceived risk

    • owners have less financial literacy

    • less predictable profit flow

  • limited access to finance

    • lack the asset requirements to receive loans

    • loans received typically have higher interest rates

4
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  • explain how owner objectives constrain business growth

  • satisficing

    • satisfaction → output < output at PML

    • comfortable/low-stress working environment

    • low risk-taking/stable market position

5
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  • explain how regulation constrains business growth

  • restricting monopolies

    • predatory pricing + tying agreements + exclusive dealing = illegal

  • restricting the sale of demerit goods

    • minimum price + indirect tax