3.1.3

Question 1

What are the 4 factors that shape the external environment?

Answer 1

1) Environmental, Social Factors
2) Market Factors
3) Democratic Factors
4) Economic Factors

Question 2

Name 2 Environmental and Social Factors

Answer 2

1) Consumers prefer environmentally friendly products

2) growth in popularity of fair trade products

Question 3

Name 2 Market Factors

Answer 3

1) Changes in the power of competitors

2) growth in sales within the market

Question 4

Name 2 Demographic Factors

Answer 4

1) changes in migration

2) changes in birth and death rates

Question 5

Name 2 Economic Factors

Answer 5

1) Consumers’ incomes

2) the level of interest rates

Question 6

5 Examples of positive factors occurring from changes in External Environment

Answer 6

1) more popular product -> rising demand
2) major competitor leaves the market
3) country’s consumer levels increase
4) interest levels fall -> cheaper to loan
5) rising incomes -> rising demand

Question 7

4 Examples of negative factors occurring from changes in External Environment

Answer 7

1) demand for environmentally friendly products -> higher costs
2) new competition in the market
3) market with product surplus -> lowering price
4) higher unemployment -> less spending

Question 8

5 What are the components of the external environment?

Answer 8

1) Market conditions and competition
2) Incomes
3) Interest rates
4) Democratic Factors
5) Environmental issues and fair trade

Question 9

What is the definition of market conditions?

Answer 9

Describes a while range of factors effecting the market

Question 10

What are the four different types of market conditions?

Answer 10

Political
Labour Supply
Incomes and Economic
Seasonal demand

Question 11

How do market conditions affect costs and demand?

Political Factors

Answer 11

If demand falls, the gov will lower taxes to increase spending rates

If demand rises, the gov will increase taxes to lower spending rates

Question 12

How do market conditions affect costs and demand?

Labour Supply

Answer 12

High unemployment means good supply of labour -> easier to employ for cheap -> higher productivity to keep their jobs

Lower unemployment means bad supply of labour -> harder to employ for cheap -> people available may need training -> increasing business costs

Question 13

How do market conditions affect costs and demand?

Income and Economic Factors

Answer 13

A recession will mean lower incomes and the demand will fall

Economic boom will mean higher income and demand will rise

Question 14

How do market conditions affect costs and demand?

Seasonal Demand and Supply Factors

Answer 14

Weather and holidays change demand and supply

Impossible to avoid seasonality

Food producers can cope with seasonality in Supply by preserving food

Question 15

What are the three types of competitor?

Answer 15

Perfect competitor

Oligopoly

Monopoly

Question 16

What is a perfect competitor?

Answer 16

Where all firms compete on an equal basis. They have similar/identical products and prices.

Question 17

What is oligopoly?

Answer 17

A small number of large firms that dominate the market. Charge similar prices

Question 18

For oligopoly, what does the business have to do to get ahead?

Answer 18

Focusing on marketing and brand image increase demand. However it requires a lot of promotion, increasing costs.

Question 19

What is a monopoly?

Answer 19

One business has complete control over its market. There is no competition

Question 20

What is the definition of interest rate?

Answer 20

Affects the cost of borrowing

Question 21

2 Effects of high interest rates?

Answer 21

1) increase in cost of borrowing

2) less money to spend, decreasing demand

Question 22

2 Effects of low interest rates?

Answer 22

1) decreased cost of borrowing

2) high incomes, rising demand.

Question 23

What are features of demographic change?

Answer 23

Population, age, sex, race, consumer tastes

Different demographic buy different things

Question 24

4 Features of Environmental Factors

Answer 24

1) traffic pollution, packaging in landfills, burning waste
2) Government legislation forces businesses to deal with environmental issues, through large fines
3) some businesses try sustainable methods. But cardboard rather than metal rises costs
4) can better rep and increase their demand. Can save business money long term.

Question 25

What are the two government legislation protecting the environment?

Answer 25

The Environmental Protection Act 1991

The Environmental Protection Act 1995

Question 26

What was the first environmental act about?

Answer 26

Introduces the notion of pollution control, therefore make businesses reduce the amount of pollution they create

Question 27

What was the second environmental protection act about?

Answer 27

It controlled pollution and made provisions for restoring contaminates land and abandoned mines.

Question 28

What is fair trade?

Answer 28

A social movement promoting improves trading terms and living conditions for producers of products in less-developed countries.

Question 29

What is sustainable production?

Answer 29

Supply does not impose cost on future generations be depleting it for example.