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business > 1.5 Understanding External Imfluences On Business > Flashcards

1.5 Understanding External Imfluences On Business Flashcards

1
Q

What affects the economic climate

A

-interest rate change
-inflation
-taxation
-levels of unemployment
-consumer income
-exchange rates

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2
Q

What is the economy

A

-activities in a country concerned with the making,distribution and use of goods and services

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3
Q

What is the economic climate

A

The general level of wealth,consumption and activity within a particular area or region

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4
Q

What is unemployment and how does it affect a business

A

-availability to work, but not having a job or losing the job that you have

-if unemployment is high consumers will buy less and sales will decrease for a business

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5
Q

What is the benefit of high employment

A

-incomes will be higher so spending on goods and services will increase
-workers will be more motivated as they will have job security

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6
Q

What happened if consumer incomes are low

A

-Lower priced shops, budget shops and supermarkets become more popular
-fewer products and devices bought

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7
Q

What happens if there is high levels of consumer income

A

-consumers are more likely to buy luxury
-more products and services are bought

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8
Q

What is demand

A

A request for something to be sold or supplied

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9
Q

What happens to a business if consumers are spending down

A

-business are making less and staff lose jobs as a result

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10
Q

What is the economic cycle

A

A cycle that the economy faces

Upturn(up),slowdown(straight),recession(down)

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11
Q

What is the impact of increase in interest rates on savers

A

-will receive more interest on savings
-encourages them to spend less so they can save more

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12
Q

What is the impact of a decrease in interest rates on savers

A

-will receive less interest rates on savings
-discourages them from saving so they may spend money instead

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13
Q

What is the impact of an increase in interest rates on borrowers

A

-will have to pay back more money that is borrowed
-will discourage them from borrowing

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14
Q

What is the impact of a decrease in interest rates on borrowers

A

-will have to pay back less for money that is borrowed
-encourage them to borrow more money to spend

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15
Q

What is inflation

A

Inflation is the general increase in prices and the fall of the purchasing power of money

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16
Q

What is the effects of inflation on consumers

A

-High inflation rates mean that unless income increases at the same time people are worse off.
-this leads to low levels of consumer spending and a fall in sales for businesses

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17
Q

What is the effect of inflation on costs

A

-wage and raw material costs rise
-sone workers may lose their jobs so higher wages can be afforded
-pay disputes with workers may result

18
Q

What is the effect of inflation on demand

A

-higher prices for customers may reduce demand
-consumers find cheaper alternatives from goods imported deducting the demand for British goods

19
Q

How to calculate interest

A

Total repayment -borrowed amount

20
Q

How do we calculate rate of interest

A

)Total interest/borrowed amount)x100

21
Q

What is the direct effect of high interest rates on a business

A

-business loans will be more expensive,reducing investment
-costs may increase as costs of existing business loans/overdrafts may be higher

22
Q

What is the indirect impact of interest rates on businesses

A

-consumers spend less as it is more expensive to borrow money/existing loans become more expensive
-consumers save more as rewards for saving increase

23
Q

What is government taxation

A

Taxation is when the government collects money from individuals or businesses in order to pay for expenditure plans

24
Q

What taxes are payed by a business
-VAT,Income tax,Cooperation tax

A

-VAT is a tax on the value of sales
-income tax is tax payer by sole traders and partnerships on profits
-cooperation tax is paid by limited companies on profits

25
Q

What is the direct effect of taxation on a business

A

-if taxes on businesses are increased,companies will invest less as their profits will be higher
-if taxes are decreased companies will be encouraged to invest more and create more jobs

26
Q

What is the indirect effect of taxation on businesses

A

-if income tax is increased then consumers will have less money to spend
-if VAT increases the prices of some goods and services will increase,again some business sales are likely to decrease

27
Q

What is exchange rates

A

-most companies have their own currencies
-exchange rate is the price of buying foreign currencies

28
Q

What is the disadvantages of business to use other currencies

A

-transaction costs
-uncertainty over costs and prices

29
Q

What is an import

A

-The purchase of a good or service from a foreign business
-leads to a flow of money out of the UK

30
Q

What is an export

A

-the sale of a good or service to a foreign buyer

31
Q

How do we change pounds into a foreign currency

A

Multiply by the rate

32
Q

How do we change foreign currencies into pounds

A

Divide by the rate

33
Q

What does SPICED stand for

A

S-strong
P-pounds
I-import
C-cheaper
E-exports
D-dearer

34
Q

What is the impact of the pound getting stronger on consumers and businesses

A

-good for consumers as prices of imports will decrease

-bad for businesses that export,it’s goods will become more expensive abroad

35
Q

What happens if exchange rates change and the currency gets weaker or depreciates

A

-it will be worth less.it will be more expensive for UK customers and business to buy from other countries

36
Q

What is the impact of currency getting weaker on consumers and businesses

A

-GOOD for BUSINESSES that exports as goods will be cheaper in the country the business sells in,increase in sales
-BAD for CONSUMERS as prices of exports will increase

37
Q

What are external influences

A

Any business will be affected by events and factors outside its control,how well it responds to these influences is likely to determine how successful it is overall

38
Q

What are the different aspects of the external environment

A

-developments in technology
-changes to economic climate
-changed to legislation

39
Q

What is the possible business response to the external factor of technology

A

-introduce eccomerce for sales and home based working for employees increasing revenue and saving costs

40
Q

What is the possible business response to the external factor of legislation

A

Costs will increase to meet requirements, businesses will have to minimise costs elsewhere,for example changing to cheap suppliers

41
Q

What is the possible business response to the external factor of the economic climate

A

-Likely that sales decreasing
-firm considers accessing other markets
-eg international markets through e-commerce

business (11 decks)

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