2.1 The External Environment Flashcards
Growth is
Is when a period of improving economic circumstance
Businesses profits are improving, consumer confidence is improving, jobs are being created
Boom is
When unemployment is very low, andpeople have lots of excess money to spend it on whatever they want
Boom is a rapid and sig growth
Recession is
When the level of real national output declined over two successive quarters. But often a sharp slowdown in the rate of growth of output, spending and income can feel like a recession.
Slump is
The opposite to growth
Profits begin to fall, job losses, fewer jobs are create, less well as being ended, and tax, revenues fall, which impacts public services
Recovery is
The first sign of grow
Businesses, see orders, improving, profits, begin to pick up, employment, prospects, start to improve, but not immediately
Uncertainty is
Factors that you can’t control or plan for:
When we don’t know what it’s coming
Oligopoly
-these markets are dominated by a small number of firms
-They will use non-priced strategies to complete
-Potentially anti-competitive competition colludes on price
Monopoly
-in monopolies, there is only one provider for the services and goods
-They have control over the price and level of output in the market
-These industries are heavily regulated usually to protect consumers
Perfect competition
- these are rare
-In these markets, you have many competitors offering the same product
Market spectrum is
The ability to compete is heavily influenced by the structure of the market in which a business operates
The more competitive market is the harder the task becomes
GDP?
Gross domestic products
Value of goods and services produced by the UK businesses within the time period
-Typically three months
What is interest rates
The cost of borrowing money or the return for investing money as a % of money borrowed or saved
Inflation
The rise in average price of goods and services produced in a country over a period of time
What is demand pull
This means spires want to buy more than sellers couldn’t actually produce, so sellers start to put prices up, so demand pulls the price up
What is employee protection legislation
Employment law regulates the relationship between an employees employer
Cost push is
This means the businesses cost start to rise e.g. oil and sellers need to put prices up to compensate. So cost to the business push the prices high.
What is the fiscal policy?
Are the use of government mechanisms in revenue collection ( taxes )
-Raise direct taxes, leading to a reduction in real disposable income
-The government can reduce its own spending on public and merit goods or welfare payment
What is Monetary policy.
Are the actions of the central bank to control the size and the rate of growth
-In 1997, gave independence of Bank of England
-Must decide interest rates
Exchange rates are
The value of one currency expressed in terms of another
Importers are
Businesses that buy goods from overseas
Exporters are
Businesses that sell goods, overseas
When a currency appreciates the pound…
When a currency depreciates the pound
Phone goes up against other currencies
Pound goes down against other currencies (weaker)
Impact of stronger pound
A stronger pound means that you can buy more currency for the same amount
Four. Types of tax
Income tax
Corporation tax
Value added tax / VAT
Exercise duties
What are the four laws in place to protect consumers?
-consumer protection act e.g. Prohibiting misleading price indication
-Unfreighted regulations e.g. Apply a false trade description to any good.
-Data protection act e.g. Prevents consumers details being sold.
-Sale of good act e.g. Fit for purpose.
What are basic legal rights of consumers?
-not giving, misleading description
-Not unsatisfactory quality
-Not fit for intended purpose
What is consumer protection legislation?
Is a section of laws of protect individual consumers against unfair, selling practices for goods services and digital content
Exercise duties are
Specific taxes charged on certain products
Example, alcohol
Value added tax is
Tax placed on all the goods we buy except food and children’s clothing
This is 20%
Corporation tax
Businesses pay corporation tax on their profits
Income taxes is when
Workers pay income tax and national insurance contributions
Both of which affect workers take home pay
Statutory rights
Legal rights based on laws, passed by Parliament
What is contract of employment?
The agreement made between the employer and the employee
What is employment rights act?
State the duties and the rights of employer and employee
National minimum wage is
-Wright to be paid a certain amount of remuneration of work and performance
-UK workers are entitled to the national minimum wage
What is working time directive?
-Limit on number of hours
-How long break should be
What is the environmental protection act?
The act defines the fundamental structure and authorities for waste management and control of emissions into the environment
What is the competition act?
The act address is two key areas of anti competitiveness behaviour:
-Anti competitive agreement
- abuse of dominant market position
What is the health and safety at work act?
Employers must protect the health, safety and welfare at work of all the employees, as well as others on their premises
It allows the government to issue regulations, guidance and approved code of practices for employers
Have my exchange rate fluctuation affect businesses
-The exchange rate will affect what a business can afford
-Materials and goods from other countries will be more expensive
The business cycle is
A cycle or series of cycles of economic expansion and contraction
Monopolistic
-in these markets you have many small firms offering different products
-Each firm have a small market
Example, restaurants
Why can inflation be a good thing?
-Sign the economies growing
Therefore, lack of inflation may be an indicate that economy is weakening
Impact on businesses of inflation
Lower sales
Suppliers more expensive
Businesses won’t borrow
Won’t expand
May increase staff wages
Impact of inflation on customers
Spend less
Save More
You may get a higher pay
Recession features
Interest rates decrease
Demand falls
Businesses, confidence falls
Spare capacity
Develop
Profits start to fall
Features of boom
Rising inflation
Full capacity
Profit high
Cost rising
Impact on businesses if interest rates go up
Less sales
Loans, more expensive
Impact on businesses if interest rates go down
More sales
More profits
Loans, less expensive
Growth features
Demand increases
Spare capacity is used up first
Businesses confidence starts to increase
Investment increases
Slump factors
Increased failure of firms
Interest rates reduced
Unemployment high
Low spending
