economic factors Flashcards
PESTLE factors
what does the term economy mean ?
refers to the process or system by which goods and services are produced, sold and bought in a country or region
what type of economy does the uk have ?
has a mixed economy with strong emphasis on free-market principles but with government intervention in certain areas
- healthcare, education, social welfare
what is economic growth ?
an indication of the change in the goods and services produced by an economy
what is economic growth measured by ?
in GDP (gross domestic product)
- looks at the value of goods and services produced in the UK economy over a period of time
what does a positive GDP suggest ?
indicates an economy is growing
what does a negative GDP suggest ?
indicates an economy is slowing down
what does GDP measure ?
measures the value of goods and services produced within a country’s borders, by citizens and non-citizens alike
what does GNP measure ?
measures the value of goods and services produced by only a country’s citizens but only domestically and abroad
what does ‘real GDP’ take into account ?
the rate of growth in the size of the UK economy allowing for the effects of inflation
what is business strategy ?
the long-term plans through which a firm seeks to achieve its corporate objectives
elements of an economic environment ?
- unemployment
- business cycle
- exchange rates
- inflation rates
- interest rates
- state of labour market
what are the four stages/phases of the business cycle ?
- boom
- recession
- recovery
- slump
what is the business cycle ?
a measurement of economic growth
what is useful to think of when considering the business cycle ?
price elasticity of demand
what is a boom ?
a characterised by a period of very strong economic growth and high levels of business and consumer confidence
boom - key characteristics ?
- more jobs created : increases living standards
- low unemployment
- firms are investing heavily : to satisfy high consumer demand
- ## higher wage demands : due to increased inflation
what is a boom caused by ?
- lower taxes
- lower interest rates
: people are encouraged to spend more money in the economy which increases the demand for products and services
what is a recession ?
characterised by two quarters of negative economic growth (when there is a decline in a company’s sales or earnings)
when does a recession occur ?
- when incomes and outputs start to fall
- increased costs of production : rising prices of labour and materials
- businesses may face lower profits
- UK government tends to raise interest rates : to attempt to avoid inflation increasing further
recession - key features ?
- decrease in real income
- lower levels of industry production
- decline in wholesale/retail sales
- Bank of England will raise interest rates : ease inflation
- limited borrowing from banks
- higher unemployment
- customers become more price sensitive
- redundancies occur : businesses reduce their costs
