2.3 The Economy and Business Flashcards
What does it mean if someone is unemployeed?
Someone without a job but is actively seeking work
What are the six main ways the economic climate affects a business?
Rate of Unemplyment
Changing levels of conumer income
Changes in interest rates
Inflation
Tax rate
Echange rate
What are some reasons people are unemployeed?
Fired
Seeking work after finishing education
Really wealthy
Looking after somebody
What is the impact of unemployment on economy!
Economy is not making full use of the workers that are availbale
What is the impact of unemployment on a business?
Consumers will have less money to spend
Businesses may be able to offer lower pay
What is income?
Money that is recieved from or work or investment
How does increase of consumer income affect a business?
more the consumer can spend
More demand for goods/services
How does decrease of consumer income affect a business?
Less money to spend
Less demand for goods and services
If there is an increase in consumer income, what is the demand like for Luxury items and Basic items?
Luxury items: increase in demand
Basic items: Decrease in demand
If there is a decrease in consumer income, what is the demand like for Luxury items and Basic items?
Luxury items: decrease in demand
Basic items: increase in demand
What is interest rate?
The cost of borrowing money or the amount a saver recieves in interest
How does an increase in interest rate effect a saver?
They will reveive more interest on their savings
Encouraged to spend less and save more
How does an increase in interest rate effect a borrower?
They will have to pay back more money
Discouraged from borrowing
How does a decrease in interest rate effect a saver?
They will receive less interest on their savings
Discouraged to save and encouraged to spend
How does a decrease in interest rate effect a borrower?
They will have to pay back less money
Encouraged to borrow more money
What type of business’ would be highly affected by changes in interest rates?
Businesses that sell expensive luxury goods
What is inflation?
A general increase in prices over time
What is the impact of inflation on consumer spending and a business’ sales?
Lower levels of consumer spending
Fall in sales for a business
How would you find rhe percentage price change?
Current price - previous price
———————————————- X 100
Previous price
What is the impact of inflation on a business overall?
Staff may ask for pay rises - higher costs
Fall in demand in UK good as its cheaper overseas
What is income tax?
A charge on income that has been earned (like wages)
What is Coporation tax?
A change on a company’s profit
What is National Insurance contributions?
Charges paid by employers and employees to cover healthcare, pensions and employee benefits
What is Value-added tax (VAT)?
A charge on sales of goods and services
How is Value-added tax (VAT) collected?
Collected by the business which passes it on to the government
What is council tax?
A charge on property based on the property’s value and the number of people in a household
An increase in income tax means that workers have to pay more tax on their income.
How does this effect consumers and businesses?
Consumers have lss money to spend on goods/services
Businesses will reduce level of investment as they expect to sell less
An increase in VAT will mean that consumers have to pay more for the goods and services this tax is charged on.
How does this effect consumers and businesses?
Consumers pay higher prices
Inflation occurs which affects business costs
What is exchange rate?
The price of one currency against another currency
What does the term ‘appreciation’ mean in currency?
Value of the currency gets stronger
What does the term ‘depreciation’ mean in currency?
Value of the currency weakens
What two acronyms are useful to determine whether imports/exports are good/worse when a pound appreciates/depreciates?
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