2.5- external influences Flashcards
What is legislation
process of making/ enacting laws
Name the 4 aims of legisaltion
-regulates rights & duties of ppl carrying out business to ensure fairness
-ensure treatment of employees is a
What is employee protection
-aims to state & uphold minimum standards of treatment employees can expect from employer
What issues does employee protection cover
-fair pay
-sick leave
-maternity, paternoty leave
-employment contracts
-relationships with trade unions
-ability of businesses to get rid of staff
-responsibilities of businesses to employees whp are made redundant
what are the 5 areas covered by employee protection laws
-minimum wage
-right to contract of employment
-increased right to sick
-redundancy
-trade union rights
what are the two different laws for the environment
environmental protection act 1990
environment act 1995 (which established the environmental agency)
What is inflation
% rate which average prices rise during a year within the UK economy
Name the 3 circumstances in which inflation has a major effect
-when rates of inflation are significantly above 2%
-when prices are rising faster than average earnings
-when UK inflation is ^ than other countries
Name the 3 effects of inflation on businesses
-firm with long-term fixed price contract -> find if costs ^ whike contract is being completed -> fixed price doesnt cover ^ level of costs -> damaging profitability
-firms with long-term borrowing -> find real value of money they repay will be lower following period of high inflation
-if inflation = ^ in UK -> UK businesses may lose competitiveness to foreign rivals -> foreign firms can charge lower prices
What is an exchange rate
value of one currency expressed in another
Which businesses would be affected by the exchange rate of the pound
UK businesses
Give the acronym explaining the effect of a stronger pound
SPICED
-Strong
-Pound
-Imports
-Cheaper
-Exports
-Dearer
Explain what happens to importants and exports when the pound appreciates
-e.g -> £1 was $1.60 but now buys $1.80
exports -> UK exports get pricier -> sales vol fall
imports -> imports to UK get cheaper -> harder for UK firms to compete
Explain what happens to importants and exports when the pound depreciates
e.g. £1 was at $1.30 but now falls to $1.15
exports -> UK exports get cheaper -> sales vol rise
imports -> to UK -> more expensive -> UK firms can compete better
What are interest rates
amount charged by lender per year for borrowing money
Name 4 effects of an increase in interest rates on businesses
-consumers -> have less money to spend as payments -> mortgages will ^ -> reduce demand
-costs ^ -> price of borrowings ^ for business
-consumers less likely to ‘borrow to buy’ -> e.g. cars -> brought on credit -> will ^ -> demand falls
-businesses less likely to invest
Why do the government change levels of taxation and government spending
to manage the economy and keep it under control
What would occur in terms of government spending and taxation to reduce level of unemployment
government spending ^ -> extra spending on road building, health services
taxation down -> enables fams to have more money avaliable
Name the 3 effects of the business cycle on businesses
-if economy slows -> consumers reduce spending
-in boom periods -> consumer demand ^ rapid
-changes in consumer income result due to changes in wages/ unemployment
Explain the effect on inferior goods when real incomes increase & decrease
-incomes ^ -> demand decreases -> consumers stop buying cheaper products
-incomes decrease -> demand ^ -> consumers switch to cheaper goods -> save money
What is the point of laws within business
ensures businesses behave in an acceptable way
What is the purpose of consumer protection legislation
ensures business actually deliver what they promise to the consumer
Name the 2 major acts of parliament covering consumer protection
-sale of goods act
-trade descriptions act
What is the purpose of employee protection
states the minimum standard of treatment employees can expect from their employer
