What are the implications of the informal economy for firms

What are the implications of the informal economy for firms that operate only in the formal economy?

(can you also explain what this questions means)

Solution

Informal and formal sectors are both part of the economy.Jobs and workers not directly controlled by the government or under the supervision of government,constitute the informal economy.

Firm\'s in formal sectors and informal sector work together.Firms in formal sectors have benefits of government\'s resources,capital, technology,etc which informal sector firm\'s lack.However,firm\'s in informal sector have better access to the market and consumers.

Middle class people prefer and depend more on products and services of Firms in informal economy.

Generally firms in informal economy are very small and large in number thus meeting the requirements of people at their location and the requirements of large firms in formal sector..

Firms in formal economy are engaged in more in manufacturing while firms in informal economy are retail sector thus playing a key role in the success of the firms in formal sector.

Firms in informal economy produce non standardised products compared to firms in formal economy at low cost.

The question means that what is the result of informal sector firm\'s being a part of the formal sector.