Benefits-Drawbacks

Main benefits or advantages of free trade can be highlighted as follows:

1. Higher Efficiency

Under free trade, domestic firms have to compete with large foreign producers. So, domestic companies try to increase their efficiency by effectively utilizing the resources.

2. Promotes Specialization

Under free trade, every countries try to produce goods as per their comparative advantage. So, it promotes specialization and division of labor to earn higher return.

3. Reasonable Price

Due to free competition, free trade facilitates wide range of quality products at lower and reasonable price.

4. Gain Of Technology

Free trade helps to gain latest technology and modern machinery from foreign countries. It helps in the industrial development of the state.

5. Gain Of Capital

Huge amount of capital can be attracted in the country because of barrier free trade. It helps the economic development of the country.

Also Read:

Disadvantages Of Free Trade

Advantages Of Protectionism

Disadvantages Of Protectionism

6. Employment Opportunities

Free trade brings capital and technology to promote industrialization in the country. Industrialization creates employment opportunity.

7. Market Expansion

Free trade helps to expand the size of production and market because domestic products can be easily sold in the international market without any barrier.

8. Restrict Market Exploitation

It restricts market exploitation and monopoly of domestic companies.

Disadvantages Of Protectionism

Major drawbacks or disadvantages of trade protectionism can be expressed as follows:

1. High Price For Low Quality

Because of trade protectionism, domestic producers can raise the price of their products and services without maintaining the quality. Due to the lack of competition, produces focus only on profit rather than quality.

2. Limited Choice To The Consumers

Barrier in trade restricts foreign products which limits the range of goods and services in the market. So, consumers have to be satisfied with with limited number products and services.

3. Idleness In Domestic Industries

In the absence of free competition, domestic industries may become idle. They may not try to improve quality, technology and management as per the requirement and consumers' choice.

Also Read:

Advantages Of Protectionism

Advantages Of Free Trade

Disadvantages Of Free Trade

4. Situation Of Monopoly

There will be a high chance of monopoly in the market because of protectionism.

5. Inefficient Resource Allocation

Trade protectionism discourages specialization and innovation. It results in inefficient allocation of resources.

Disadvantages Of Indirect Taxes

Major drawbacks or disadvantages of indirect taxes are as follows:

1. Unfair/Regressive

Both rich and poor people have to pay same amount of tax because taxes are included in the price of the products and services. So, poor people have to may more amount of their income as tax. So, indirect taxes are regressive and unfair in nature.

2. No Civic-consciousness

Tax payer does not feel the burden of taxes as they are wrapped in the purchase price. So, it lacks civic-consciousness.

3. Restrict Free Trade

Free trade may be restricted due to high export and import duties.

Also Read:
Advantages Of Indirect Taxes
Advantages Of Direct Taxes
Disadvantages Of Direct Taxes
Difference Between Direct Tax And Indirect Tax

4. Inflationary

Higher tax rate increases the price of the products which may lead to inflation.

5. Harmful To Industries

Cost of production will be high if raw materials and machinery are highly taxed. It reduces the competitive capacity of industries.

6. Burden For Poor People

Indirect taxes reduce the saving capacity of poor people. So, these taxes are not suitable for households and low-income groups.

Advantages Of Indirect Taxes

Major benefits or advantages of indirect taxes can be pointed as follows:

1. Convenient To Pay

Indirect taxes are imposed while purchasing goods or services. Taxes are already added in the price of the product. So, the 'Pre-coated' tax makes convenience to both the tax payer and the administration.

2. Broad Based

Since tax is wrapped up in the price of goods and services they are imposed on all people (i.e rich, poor, young, old etc.). So, indirect taxes have wider scope than direct taxes.

3. Economical

These taxes are easy to collect. It takes less effort, less time and less cost to collect tax. So, indirect taxes are economical in nature.

4. Flexibility

Indirect taxes are more flexible than direct taxes. Tax rates can be easily changed by the authority as per the nation's requirement.

Also Read:

Disadvantages of Indirect Taxes

Advantages Of Direct Taxes

Disadvantages Of Direct Taxes

Difference Between Direct And Indirect Tax

5. No Tax Evasion

As we know that taxes are included in the purchase price of the product, there is no chance of tax evasion.

6. Limits Harmful Consumption

Harmful products such as tobacco, alcohol and intoxicants are heavily taxed by the state. It helps to limit the consumption of such products.

Disadvantages Of Direct Taxes

Major drawbacks or disadvantages of direct tax can be pointed out as follows:

1. Chance Of Evasion

There is high chance of tax evasion. It is very easy for the people to evade tax by submitting false income report. Corrupted administration also plays significant role in tax evasion.

2. Inconvenience

It is inconvenient for the taxpayer to follow different process and filling different forms to pay tax. It is also inconvenient to make proper record of payment.

3. Discourage Investment

Higher tax rate reduce the saving capacity of the people. Low saving affects investment capacity. So, direct taxes adversely affect the capital formation.

Also Read:

Advantages Of Direct Taxes

Advantages Of Indirect Taxes

Disadvantages Of Indirect Taxes

Difference Between Direct And Indirect Tax

4. Reduce Motivation

High tax rate demotivates people to work hard and make more money. It hampers their ability and effectiveness at work.

5. Discourage Entrepreneurs

Entrepreneurs are discouraged to commence business because of direct taxes. It negatively impacts nation's business environment.

Advantages Of Direct Taxes

Merits or advantages of direct tax can be expressed as follows:

1. Simple To Estimate

One notable advantage of direct tax is its simplicity. Direct taxes are very simple to estimate and easy to understand. Tax amount can be calculated without any complication.

2. Ensures Fairness

Fairness is another benefit of direct taxes. Higher tax rate is imposed for high income groups and lower for lower income people. So, it ensures fairness, equality and justice according to the level of income.

3. Transparency/Certainty

Direct taxes are transparent in nature. Both tax payers and receivers (government authority) are certain about the rate and amount of tax to be paid.

Also Read:

Disadvantages of Direct Taxes

Advantages Of Indirect Taxes

Disadvantages Of Indirect Taxes

Difference Between Direct And Indirect Tax

4. Less Costly

Generally taxes are collected at the source which saves both time and money. So, direct taxes are economical in nature.

5. Elastic

Tax rates can be increased or decreased by the government as per the need of the country. So, direct taxes are elastic in nature.

6. Revenue For Government

Direct tax is a major source of government revenue. It is highly productive and very important for economic development.

Disadvantages Of Index Number

Keshav Poudel Education , Statistics

Major limitations or disadvantages of index number can be expressed as follows:

1. Lack Of Accuracy

Index number lacks accuracy because it represents only the rough indication of relative changes in variables (i.e. price and quantity).

2. Difficult To Select Base Year

In this method, variables of current year are compared with the variables of base year. But it is very difficult to choose suitable base year while constructing index number.

3. Nor Suitable For Long Period

Index number is not suitable to compare the changes over long period of time.

Also Read:

Advantages Of Index Number

4. Limited Use

Index numbers are constructed for the specific time and for certain objectives. They cannot be used for other purposes.

5. Difficult To Select Price

It is difficult to select price (wholesale price or retail price) while preparing index number.

6. No International Comparison

Because of different bases, different variables, it is not possible for international comparison.

Advantages Of Index Number

Keshav Poudel Education , Statistics

Main advantages or uses of index number can be highlighted as follows:

1. Measurement Of Relative Changes

Index number helps to measure the quantitative changes in variables by comparing the data of current year with the data of base year.

2. Measurement Of Price Level Change

Under this method, the price of current period can be compared with the price of past period. It helps to know the changes in price level and value of money.

3. Measurement Of Inflation Rate

Index number helps to know the inflation rate by measuring price level and value of money between two periods.

4. Measurement Of Changes In Standard Of Living

It helps to measure standard of living by comparing cost of living and price level. So, the living standard of people can be known.

5. Wage Policy Formulation

Index number helps to determine wages and allowance of employees. Adjustment in wages and salaries are made according to the cost of living.

6. Useful In Decision Making

Index number is very useful in planning and decision making process of the business firm.

Also Read:

Disadvantages Of Index Number

7. Useful In Foreign Trade

It is used to compare imports and exports of two different periods. So, it provides key information about the volume of foreign trade.

Disadvantages Of Division of Labor

Keshav Poudel Business , Management

Main drawbacks or disadvantages of division of labor can be expressed as follows:

1. Monotony Of Work

Repetition of same kind of work everyday may lose their interest and create monotony. It leads to decrease in efficiency and quality of work. Therefore, monotony of work is one of the major drawbacks of division of labor.

2. Interdependence

There is interdependence between different departments, different units, different workers groups and different companies. If any one of them do not operate properly, the whole production process will be disturbed.

3. Reduce Worker Mobility

In division of labor, one one type of task is given to each worker. So, it reduces workers mobility.

Also Read:
Advantages Of Division Of Labor
Advantages And Disadvantages Of Specialization

4. Over Production

Division of labor increases the risk of over production because of increased efficiency. Over production may lead to depression.

5. Unemployment Problem

Due to the lack of mobility, workers cannot develop new skills and ideas to do different type of job. They can only perform certain part of the job. So, it will be difficult for them to find other types job in the future.

Advantages Of Division Of Labor

Keshav Poudel Business , Management

Main benefits or advantages of division of labor can be expressed as follows:

1. Right Man For Right Job

Division of labor follows the principle of 'Right man for right job'. Appropriate job is given to the workers according to their skills and ability that helps to improve employees' performance that leads to increase in the productivity of the firm.

2. Higher Productivity

Workers are employed in right place as per their capacity. Skilled and capable workers can perform their job efficiently without wasting the time and effort. Specialization minimizes errors in the production process. It leads to higher productivity.

3. Skill Enhancement

Workers can enhance their skills because of the repetition of same kind of work everyday. So, division of work makes the workers perfect in their job.

4. Less Training Period

Because of specialization, workers do not need to learn the whole task. They can learn only a part of the job which is related to them. So, it saves time and effort while conducting training program.

5. Invention

By doing the same task again and again, talent workers may discover the simple and easy process to perform the job. So, division of labor may lead to invention.

Also Read:

Disadvantages Of Division Of Labor

Advantages And Disadvantages Of Specialization

6. Low Cost Of Production

Division of labor ensures higher productivity because of efficient use of human and other resources. Increased production leads to lower cost of production per unit.

7. Increase Goodwill

Because of large scale production, cost of production can be minimized. So, customers get high quality products at lower price. It helps to increase goodwill and image of the firm.

Disadvantages Of Market Economy

Keshav Poudel Business , Economics

Main drawbacks or disadvantages of market economy can be highlighted as follows:

1. Wealth Disparity

One of the major drawbacks of market economy is unequal distribution of wealth. It widens the gap between wealthy and poor individuals. Rich people become more wealthier and poor become more poorer.

2. Distorted Investment

Producers invest their capital only in profitable sectors. So, factors of production are not employed adequately in public sectors like education, health, transportation etc.

3. Workers Exploitation

In market economy, workers are highly exploited by the producers. Bad working condition, no safety measures, long working hours and less wage payment are the major problems of workers.

4. Economic Instability

Because of the lack of control, regulation and supervision, market economy may create uncertainty and instability in the whole economy of the country.

Also Read:

Advantages Of Market Economy

5. Poor Quality Goods

Main motive of market economy is profit maximization. So, producers can make low quality products to earn more profit.

6. Monopoly

Large producers can dominate the market by eliminating the rival companies. It may create monopoly in the market.

Advantages Of Market Economy

Keshav Poudel Business , Economics

Main advantages or benefits of market economy can be highlighted as follows:

1. Increase Business Efficiency

There will be a competition among producers to produce high quality products at lower cost. So, latest technology and modern methods of production are introduced. Therefore, market economy helps to increase business efficiency.

2. Promotes Innovation

It is another notable benefit of market economy. It promotes innovation because producers wants to create new products in order to gain high profit.

3. Consumer Sovereignty

In market economy, products are produced according to the need and demand of the consumers. So, it gives emphasis on consumer sovereignty.

4. Proper Use Of Economic Resources

Economic resources are properly utilized so that maximum profit can be obtained and wastage can be minimized.

5. Foreign Investment

Market economy helps to bring foreign investment in the country which helps in industrial and economic development of the nation.

Also Read:

Disadvantages Of Market Economy

6. Freedom Of Choice

Consumers are free to choose and consume the products or services according to their needs, choice and income. Large variety of products are available for all types of people.

7. Fare Competition

It encourages free and fare competition among the producers.

Disadvantages Of Branch Banking

Major limitations or disadvantages of branch banking system can be highlighted as follows:

1. Chance Of Mismanagement

Because of large size, various branches, large number of employees and large scale operation there may be a lack of strict supervision, effective communication and proper controlling in branch banking system. So, there is a high chance of mismanagement in this type of banking.

2. Long Decision Making Process

In branch banking system, branch managers have very limited power. They have to consult with the head office to make any decision. So, decision making process is very long as compared to unit banking.

3. No Prompt Action

Prompt action cannot be taken because of delayed decision.

Also Read:
Advantages Of Branch Banking
Advantages Of Unit Banking
Disadvantages Of Unit Banking
Difference Between Unit Banking And Branch Banking

4. High Operating Costs

Branch banking requires high operating and overhead expenses because of large size, different branches and large number of employees.

5. Lack Of Initiative

Branches have limited powers and they cannot take decisions independently without consulting the head office. So, this type of banking system may lack initiative.

Advantages Of Branch Banking

Major advantages or benefits of branch banking can be studied as follows:

1. Large Size

Branch banks are large in size and they are spread all over the country. So, they gain the benefits of large scale operation.

2. Adequate Capital

Branch banks have much more capital than unit banks. So, they never suffer from the limitations of inadequacy of capital.

3. Less Costly

These banks have effective management, sufficient resources and proper system which reduce the cost of operation.

4. Adequate Deposit And Investment

They can collect huge amount of deposit from the public which leads to greater investment capacity.

5. Increase Public Confidence

Services provided by branch banks are far better than the services of unit banking system. It helps to build public confidence and trust.

6. Risk-Spreading Capacity

In branch banking system, losses of one branch can be recovered by the profit of other branches.

7. Employment Opportunity

Branch banks require more human resources to operate in different departments, sections and branches. So, it creates employment opportunity in the country.

Also Read:

Disadvantages Of Branch Banking

Advantages Of Unit Banking

Disadvantages Of Unit Banking

Difference Between Unit Banking And Branch Banking

8. Goodwill And Image

Proper and convenience service provided by branch bank helps to maintain goodwill and image of the organization.

9. Efficient Management

Management is very effective and efficient because of specialization, division of labor and highly qualified managers and staffs.

Disadvantages Of Unit Banking

Major disadvantages or drawbacks of unit banking system can be highlighted as follows:

1. Lack Of Solvency

Due to small scale operation, it has less capital than branch bank. So, there is a lack of solvency in unit banking.

2. Lack Of Specialization

Unit bank cannot hire skilled, qualified and specialized employee because of limited capital. So, it lacks specialization.

3. No Division Of Labor

Unit bank cannot practice division of labor in the workplace because of small size and limited capital.

Also Read:

Advantages Of Unit Banking

Advantages Of Branch Banking

Disadvantages Of Branch Banking

Difference Between Unit Banking And Branch Banking

4. Lack Of Fund Mobility

Unit banking lacks mobility of fund because of limited area and localized operation.

5. Local Pressure

Unit banks have to face local pressure and disturbance. So, it is very difficult of offer banking service in certain locality only.

6. Less Profit

Unit banks have less profit because of the lack of branch, limited area of operation, less deposit and less investment opportunities.

Advantages Of Unit Banking

Major advantages or merits of unit banking system can be highlighted as follows:

1. Efficient Management

In unit banking, all services are offered from a single office. Because of small scale operation, supervision, coordination, coordination and controlling is very easy. So, it can be managed efficiently and effectively than branch banking.

2. Less Irregularities And Fraud

Because of effective supervision and effective controlling system, there is less risk if irregularities and fraud under this banking system.

3. Prompt Decision

Bank manager can make any decision without consulting others. So, prompt decision is possible in unit banking. Quick decision helps to act quickly.

4. Low Overhead Cost

Because of small scale operation and less number of employees, Operational and overhead costs are lower than branch banking system.

5. Less Risk

Unit banking is less riskier than branch banking system because of small amount of capital.

Also Read:
Disadvantages Of Unit Banking
Advantages Of Branch Banking
Disadvantages Of Branch Banking
Difference Between Unit Banking And Branch Banking

6. Local Development

Unit banks collect deposits from local people and utilize for the development of the same area. So, these banks play important role in the development of the society.

7. No Competition

Unit bank is free from competition because it is located at a certain area where other banks do not exist.

8. Direct Customer-Banker Relation

It is easy for the management to establish direct contact and relation with customers and other related parties because of small scale operation.

Advantages And Disadvantages Of Bank Regulation

Keshav Poudel Banking ,

Benefits/Merits/ Advantages Of Bank Regulation

Main advantages or benefits of banking regulations are as follows:

1. To Build Confidence

Bank regulation helps to build public confidence and create trust in the banking system of the country.

2. Safety

Banking regulation ensures the safety of public savings in the bank. It is essential to protect public deposit.

3. Credit Control

Credit control is another important advantage of banking regulation. It prevents excess credit creation by controlling loans and investments.

4. Fairness

Bank regulation ensures fairness in financial services to all the customers without discrimination on the basis of race, sex, religion etc.

5. Implementation Of Policy

It helps to implement government's policy properly to assist the economic policy of the nation.

advantages disadvantages bank regulation

Drawbacks/Demerits/ Disadvantages Of Bank Regulation

Major drawbacks or disadvantages of banking regulation are as follows:

1. Less Profit

Unnecessary control and heavy regulation may restrict banks to perform their tasks freely. So, banks cannot earn adequate profit.

2. Failure

Banking regulation may control unnecessary banking activities but it cannot prevent bank failure.

3. Costly And Time Consuming

Bank regulation is very costly and time consuming process.

Disadvantages Of Multinational Company

Main disadvantages or drawbacks of multinational company can be highlighted as follows:

1. Complex Legal Requirements

Multinational companies need to follow complex legal requirements and strict laws of host country. So, it is very difficult to establish and operate business in foreign countries.

2. Loss Of Sovereignty

Multinational companies tries to influence internal politics and they disregard national policy and priorities of the host country. This may negatively impact sovereignty of the host country.

3. Threat To Local Industries

Multinational companies may dominate local industries by increasing unfair competition and by establishing monopoly in the local market of host country.

Also Read:

Advantages Of Multinational Company

Advantages Of Joint Stock Company

Disadvantages Of Joint Stock Company

4. Transfer Of Capital

These companies bring large amount of money to the host country. It may create negative impact in the economy of home country.

5. Labor Exploitation

Multinational companies offer low wages to the employees of host countries in order to increase profit. So, exploitation of labor is a major drawback of these companies.

Advantages Of Multinational Company