External Environment 2

Question 1

Market failure

Answer 1

free market fails to produce the most efficient allocation of resources

Question 2

Macroeconomic environment

Answer 2

all businesses operate in, includes national and global influecnes

Question 3

Microeconomic environment

Answer 3

particular to each business, how the market mechanism works

Question 4

Four factors of production

Answer 4

Land
Labour
Capital
Entrepreneurship

Question 5

Public sector investment

Answer 5

financed by higher tax or increased deficit betwn government income and spending

Question 6

Recession

Answer 6

~ demand falls
~ investment projects look unprofitable
~ inventory reduced
~ businesses fail

Question 7

Recovery

Answer 7

~ gov limits decline by boosting demand
~ quicken as confidence returns
~ business expectations become more optimistic

Question 8

Boom

Answer 8

~ output level climbs above its trend path
~ capacity and labour fully utilised = bottlenecks
~ rises in demand (price not production increases)
~ optimistic expectations

Question 9

Demand pull inflation

Answer 9

price rises from excess demand over supply

caused by fiscal and credit

Question 10

Cost push inflation

Answer 10

price rises from increase in costs of production

Question 11

Fiscal

Answer 11

increase in government spending or reduction in tax

Question 12

Credit

Answer 12

credit extended to customers increases + decrease in interest rates

Question 13

Monetary policy

Answer 13

policies on money supply, interest and exchange rates

Question 14

Fiscal policy

Answer 14

policies on taxation, borrowing and spending

Question 15

Competition Act 1998

Answer 15

Prohibits:
~ Anti-competitive agreements
~ Abuse of a dominant position

Question 16

Enterprise Act 2002

Answer 16

makes cartel activity a criminal offence

Question 17

Competition and Markets Authority (CMA)

Answer 17

government body responsible for promoting effective competition
in-depth enquiries into mergers and regulations etc

Question 18

EU regulations

Answer 18

Equivalent to Acts of Parliament, self-executing

Question 19

EU directives

Answer 19

Not self-executing, issued to certain member states who are required to enact them in national law within a certain timeframe

Question 20

EU decisions

Answer 20

addressed to certain members who are immediately bound by them