External Influences Flashcards
Demand
The amount of a good / service that customers are willing to buy at any given price
Supply
The amount of a good or service that seller are willing and able to sell at any given price
Equilibrium price
The situation in the market where demand is equal to supply and both parties are happy. In theory, customers can buy what they want and shops have no unsold stock.
Price
How much a product costs. Can affect demand
Income
The amount that someone earns.
Wealth
The combined value of someone’s assets. (Money, shares, property value etc.)
Excess supply
The producers are producing more goods than are demanded. Shade the bottom of the graph.
Excess demand / Shortage
Consumers are demanding more than the seller can provide. Shade the top of the graph
Elasticity of demand
How sensitive / responsive quantity demanded is to a change in price.
Inelastic demand
The quantity is insensitive / unresponsive to a change in price.
Elastic demand
Quantity is sensitive / responsive to a change in demand
Demographic changes
Changes in the size and composition of a population OR the characteristics of human population groups.
Taste and fashion
The products that are popular at the time, that customers will want to buy. An example is jumpers in winter
Government action
A campaign by the Government to promote or discourage something or the Government providing subsidies to businesses to help them grow.
Substitutes
Alternative goods that can be used for the same purpose
Complements
Products that are bought together and used in conjunction, like a printer and printer ink.
Demand factors
Wealth, Advertising, Taste and fashion, Government action, the price of other products (subsidies and complements)
Supply factors
Price, Costs, Taxes, Subsidies, price of other products
Subsidies
Money from the Government given to a business it believes to be beneficial. A payment for every unit supplied.
Competitive supply
A fall in the price of one product makes it more profitable to supply another.
Competition
Rivalry amongst sellers
Market
Any situation where buyers and sellers are in contact to establish price
Non-physical market
A business with no physical storefront, exist because of the convenience that they offer
Physical market
A business with an actual storefront, exist still because of the personalisation that they offer
Online market
Tangible products that are shipped to you
Digital
Products with no physical form which are downloaded
Competitive market
A large number of firms compete to sell similar products. They compete on price.
Monopoly
A market theoretically dominated by one seller, but in reality one business holds at least 25% of the market
Economies of scale
Average costs fall as output increases
Oligopoly
A market dominated by a few firms who compete on non-price differences. Suggested that they collude.
Collusion
An illegal action where rival businesses cooperate for mutual benefit, often agreeing on setting high prices to push out competitors
Market price
The range of prices that that most people would be willing to pay for an item.
Mark-up
Difference between the selling price and the production costs, the profits
Revenue
The total amount of money a business receives in sales
Profit
The amount of money that a business makes once costs have been taken off
Monopolistic competition
Many firms compete on non-price differences.
Market size
The collective value of the goods/services that buyers purchase
Market growth
The percentage change in the size of the market, measured over a specific period
Market share
The percentage of total sales by value that a business has in a specified market
Reasons to enter a market
Achieve social objectives, make profit, exploit a gap in the market, personal objectives
Barriers to entry
A factor that could prevent a firm from entering and competing in a market
Example of barriers to entry
Large start-up costs, large marketing budget to break loyalties, the inability to gain EoS, the possibility of a price war, legal restrictions (patents)
Barriers to exit
The factors that could prevent a firm from leaving a market
Examples of barriers to exit
Difficulty in selling capital, high redundancy costs, contracts with suppliers
Market dominance
A measure of market share compared to competitors
Market power
The ability of a firm to influence or control the terms on which goods are sold
Merger
Two business come together to form an entirely new business entity. Consent is given by both parties.
Acquisition
One business buys a majority share in another and takes it over.
Organic growth
Expansion within a business by increasing sales and increasing market share
The CMA
The competition and markets authority, can stop mergers and acquisitions from taking place and investigates market dominance and anti-competitive practices
Inflation
The general tendency of costs in the economy to rise
Consumer Price Index
The average price of a basket of shopping. The price in one quarter is compared to the next
Causes of inflation
Cost inflation- business costs increasing
Demand pull- more people will buy the product
Gross Domestic Product (GDP)
The total value of output produced in an economy in a year
Standard of living
The degree of wealth and material comfort available to a person or community
GDP per capita
A measure of economic output that accounts for its number of people. Good for measuring standard of living
Economic growth
The annual percentage change in GDP
Recession
Two consecutive quarters of negative growth
Exchange rate
The value of one currency in terms of another
Strengthening exchange rate
The pound will buy more of a foreign currency
Weakening exchange rate
The pound buys less of a foreign currency
Import
A sale which leads to money leaving a country or economy
Export
A sale that leads to money coming into a country or economy
Factors that influence demand for the pound
Desire for UK exports
Foreign investment
Interest rates
Interest rates
The reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
Unemployment
A situation in which people who are able and willing to work are not able to find employment
Cartel offences
Where businesses agree not to compete, either by price fixing, market sharing or bid rigging
Balance of payment / Trade
Difference between the value of exports and imports
Taxation
A compulsory payment to the Government
Indirect Taxes
A tax on expenditure/spending. Paid to the tax authorities, not by the consumer, but by the suppliers of the good or service
Direct Taxation
Taxes on income and profits, paid directly by the bearer to the tax authorities
Income tax
Tax taken out of a person’s income. Those earning more pay more
National insurance
Taken out as a contribution to the state pension and NHS
Corporation tax
A tax on profits made by companies (not paid by sole traders and partnerships)
Stamp duty
Tax paid on the purchase of property
Subsidy
Payments by the government to suppliers. The effects is to increase the supply pay of particular goods
Supply side policies
Policies aimed to improve the economy’s overall productive capacity
Business cycle
The observed pattern of increases and decreases in economic growth measured by % gdp over the long term
4 stages of the business cycle
Boom
Recession
Slump
Recovery
EU
The economic and political union of most European states aimed at reducing trade barriers and harmonising economic policy
Demographics
The characteristics of human population groups, e.g the size of the population
What types of environmental problems do business operations cause?
Air pollution Water pollution Land pollution Noise pollution Congestion (vehicle pollution)
Sustainability
The endurance of resources. Refers to preventing negative impacts from economic systems and production the Earth and its environment
Ethics
Concerned with the judgement about whether something is morally right or wrong
National minimum wage
The minimum pay per hour workers of school leavers age are entitled to by law that is reviewed every year by the Government. The rate for age groups is different
National living wage
The new minimum wage rate for those 25 and over
Intellectual property
Intangible property that is the result of creativity. E.g a song’s melody
Trademark
A company can register a trademark for a name logo etc, anything that brands their products or company
Copyright
Legal protection against copying for authors, composers and artists. It is automatic and doesn’t need to be applied for
FCA
Financial Conduct Authority
Clean air act
Act to reduce smoke levels by introducing smoke free zones where only smokeless fuel can be burnt
Environmental protection act
Deals with waste, places the responsibility to dispose of waste on local authorities. Business must handle waste properly and within the law
Globalisation
The increased integration and interdependence of national economies OR the world coming together to trade in each other’s markets
Strategy
A plan of action
Multinational
A business that has activities and operations in in more than one country
Global strategy
A plan of action on a global scale
Brand
A distinctive product offering created by the use of a logo, symbol, name,design, packaging or a combination thereof
Global brand
A brand that is recognised throughout much of the world
International trade
Selling across borders, exchange of goods and services between countries
Free trade
Trade without tariffs or quotas being imposed on products
Protectionism
Taxing imports to protect domestic industries
Trading bloc
A group of countries within a particular geographical region that have reduced or removed trade barriers for its member countries
Emerging market
Term used to describe a country that is achieving rapid economic growth
Digital revolution
Involves the shift from analogue to mechanical to digital technology
Information Age
A time when large amounts of information is widely available
