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
