External Environment Flashcards
What do market conditions affect?
Costs and demand
What are market conditions?
A term that describes a wide range of factors affecting the market.
What do governments try to do if demand in economy is too low?
Cut taxes so people have more disposable income
How do governments try reduce demand if it’s too high in the economy?
Raise taxes so people have less money to spend
What does high unemployment rates do to businesses costs?
Businesses can hire easily and won’t have to pay high wages so costs are low
What does low unemployment rates do to businesses costs?
People may need training which increases costs
Does a recession mean demand increases or decreases and why?
Decreases because people have less money to spend
What is perfect competition?
Where all firms compete on an equal basis
What happens in an oligopoly?
A small number of firms dominate the market and charge similar prices.
What is a monopoly?
Where one business has complete control over its market - no competition
What do interest rates affect?
The cost of borrowing and return on savings
What are interest rates?
The fee paid for borrowing
How are interest rates calculated?
As a percentage of the amount borrowed.
What do high interest rates mean for consumers?
That consumers have less money to spend
Give 2 factors of market conditions that affect demand for a product
Economy
Seasonal demand and supply
What is demographic change?
The structure of a population changes over time in terms of age, sex and race
Why is demographic change important for businesses?
It has an impact on the demand for products.
Why have businesses started to target the elderly market in the UK?
To increase demand for their products because the UK has an ageing population.
What does an ageing population mean for the supply of workers?
A smaller percentage of population are of working age which results in the supply of workers decreasing.
How can environmental factors increase business costs? 2 points
Because they are using up resources in an unsustainable way and government legislation could be in place.
Why have businesses started to implement fair trade policies when purchasing from suppliers?
Because consumers are becoming ethically concerned.
How can technological advances influence demand and costs?
Improves marketing which can increase demand and reduce costs because it is all digital.
What does it mean if a business has implemented fair trade policies?
The business pays higher and fairer prices for products.
What is another way for businesses to find out what consumers like and dislike?
Social media platforms
What can new technology improve in the long term?
Production efficiency
What is variations in supply and demand throughout the year called?
Seasonality
What do businesses must do with seasonality?
Must have strategies to deal with it
