IGCSE Development Studies: Specimen Questions with Answers 75 - 75 of 98

Explanation

Politics of a nation has functions of cooperation, resolution of conflict, negotiations, organizing and use of different resources for production and distribution.

Allocation of resources is the distribution of resources among different productive uses. Allocation of resources arises because the resources of the society are limited in nature on the other hand human wants are unlimited. So, to meet these unlimited wants the resources are allocated in the best possible manner.

Political system of a country influences the decision of allocation in different ways like:

• Subsidies are the financial support provided to the industry, business, or an individual by the government. Example-payments given to farms and agribusiness as a supplement to income and to regulate the supply and cost of crops.

• Tax incentives are also used to encourage the behavior of industries and to stimulate economic development in the form of reductions, refunds, or exemptions.

• Preferential credit treatment that businessman receive in the form of lower interests’ rate, extended duration of loans, relaxed repayment conditions, etc. Government also offers this preferential credit treatment to low-income buyers, small entrepreneurs that face a trouble in competing in the domestic and international market.