IGCSE Economics Paper-2: Specimen Questions with Answers 98 - 99 of 100

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Labor intensive industry requires a large amount of labor to produce goods and services. In contrast to capital intensive which requires less amount of labor? Example 10 workers can produce 10,000 products per day.

Question 98 (2 of 4 Based on Passage)

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What is the impact of GST on labor intensive industries?

Explanation

The Impact of GST on Labor-Intensive Industries is as Follows

  • Post implementation of GST the growth of labor-intensive industry was declining. It was because of the tedious paperwork and strict compliance.
  • Labor-intensive sectors were not able to cope with the adverse of GST, which came close to demonetization in India.
  • The increased cost resulted in an increase in the working capital needs of exporters.
  • Supply chains were majorly affected and the industrial production was seriously hampered.
  • Due to large share of the unorganized labor-intensive sectors had to bear the effects of GST.
  • Imports increased drastically in these industries. Historically, exports/imports of these sectors have moved in tandem.
  • It has an impact on their revenue growth.
  • It will also have an impact on employment.

Question 99 (3 of 4 Based on Passage)

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Why some organizations are labor intensive and some are capital intensive?

Explanation

Some Business is Labor Intensive Because of the Following Reasons

  • Labor intensive production requires less amount of capital investment they require relatively high level of labor compared to capital investment.
  • Labor intensive technique can be used to produce specialized or personalized products on a small scale.
  • It requires less amount of capital investment.
  • Importance is given to manual labor in such industries.

Some business use capital intensive technique because:

  • Capital-intensive technique requires a relatively high level of capital investment compared to the labor cost.
  • Capital intensive production technique is highly automated and to be used for production on a large scale.
  • It is associated with flow production but requires heavy and costly equipment.

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