External influences- Blackwell Flashcards
The definition of demand
The amount of a good/service that customers are willing and able to buy at any given price.
Definition of supply
The amount of a good/service that sellers are willing and able to sell at any given price.
Equilibrium price
The situation in a market where demand is equal to supply ie both parties are happy. In theory, customers can buy what they want and shops have no unsold stock.
Which way does a positive impact shift the curve?
To the right
Which way does a negative impact shift the curve?
To the left
What are the demand factors?
Wealth, taste and fashion, advertising, promotional offers and public relations, demographic changes, government action and the price of other products
How is a change in price shown on a curve?
It is shown on the existing curve.
What are the supply factors?
Price,costs,taxes,subsidies,price of other products.
What happens if there is a excess supply?
Suppliers will reduce the cost to make customers buy it. They will then reduce the supply as they want to sell the most at the highest price.
What will happen when there is excess demand (a shortage)?
The demand will push the price up, making suppliers want to supply more and bringing the price closer to equilibrium.
What does the line look like when it is an inelastic demand curve?
Steep.
What does the line look like when it is an elastic demand curve?
Flatter.
State four factors that make demand inelastic.
The number of substitutes, the degree of necessity, if it is subject to habitual consumption, peak and off peak demand.
Definition of elasticity of demand.
Measures how sensitive quantity demanded is to a change in price.
Definition of inelastic demand.
The quantity demanded is insensitive to a change in price.
Definition of elastic demand.
Th quantity demanded is sensitive to a change in price.
Definition of competition.
Rivalry amongst sellers.
Definition of a market.
It is any situation where buyers and sellers are in contact in order to establish price.
Definition of an online market.
Physical products shipped to you.
Definition of a digital market.
Things that can be downloaded onto a device.
Definition of market price.
A price range in a market at which consumers are prepared to buy.
Definition of mark up.
The difference between the cost of producing a product an item and the price at which it is sold.
Definition of a competitive market.
A market where there are a large number of sellers. Businesses mainly compete on price.
Definition of a monopoly.
A market dominated by one seller or one firm that has over a 25% market share.
What prices do competitive market businesses sell at and monopoly businesses sell at?
Competitive- low (usually)
Monopoly- high (not always)
Reasons why prices in a monopoly may not always be high.
Economies of scale and to force a new business out of the market.
Definition of economies of scale.
They arise when unit costs fall as output rises.
How are unit costs calculated?
Total production costs in period/ total output in period.
Features of a monopoly.
Higher prices, lower quality goods, little choice for customers, high barriers to entry.
Definition of a oligopoly.
When the market is dominated by a few firms eg the mobile phone network market- o2, EE, sky.
Features of an oligopoly.
Prices are high and similar, high barriers to entry, products are similar, businesses compete on non price difference, may force new firms out of the market.
What is collusion.
A secret agreement. Companies cooperate for their mutual benefit eg to influence prices to prevent fair competition.
Definition of monopolistic competition.
A market structure with many competing firms each of whom supplies a slightly different product (non price difference).
Definition of market size.
The collective value of the goods/ services that buyers purchase.
Definition of market growth.
The percentage change in the size of the market, measured over a specific period.
Definition of market share.
Percentage of total sales that a business has in a specified market.
What options does a business have in a shrinking market.
- Adapt to a changing market- customers off competitors.
2. Enter a completely new market.
Why might a firm enter a market?
Satisfy an interest, fill a gap, achieve social objectives, gain profit, diversify from another market
What are some barriers to entry?
Large start up costs, break customers loyalty, inability to gain eos , a price war may be started, legal restrictions
Barriers to exit
Difficult to sell capital, high redundancy costs, contracts wit suppliers have to be honoured
Definition of market dominance.
A measure of market share compared to competitors.
Definition of market power
The ability of a firm to influence or control the terms and conditions on which goods are sold and brought.
Definition of a merger
When two often equal businesses agree to join together as one business.
Definition of a takeover (acquisition)
When an often larger business takes over another smaller business.
Disadvantages of mergers/takeovers.
Suffer from deos, communication issues, take on extra debt, redundancies, higher prices, a dominant business.
Definition of organic growth.
Expansion within a business.
What is the main aim of the cma
To promote competition.
What does the cma do?
Investigate mergers which could restrict competition, investigate abuse of dominance, criminal proceedings against individuals, enforces legislation.
Sanctions that the cma can impose.
10% of their global turnover, customers and competitors involved can sue, individuals can be disqualified/fired
Impacts of regulation
Better quality goods, more choice, better value, more businesses, better terms with suppliers,less abuse of dominant positions, firing,prosecution, suspension
What does steeple stand for?
Social, technological, environmental, economic, political, legal and ethical.
How do you work out inflation?
Difference/original x100
Causes of inflation
Demand pull and cost push
Definition of gdp
The total value of output produced in an economy in a year.
Definition of economic growth
The annual percentage change in gdp
How can the government facilitate economic growth?
Encourage investment, improve infrastructure, improve the quality of human capital.
Definition of exchange rates
The value of one currency in terms of another
Definition of an import and an export
Import- a sale which means money exits an economy
Export- sale which means money enters an economy
What does spiced stand for
Strong pound, imports cheap, exports dear
Factors that effect demand for the pound
Foreign investment in the uk, desire to buy uk exports,hot money flows into the uk, political events.
Definition of interest rates
Is the reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed.
Definition of unemployment
A situation in which people who are able and willing to find work are not able to find employment.
Why is unemployment bad?
It is a waste of Human Resources- producing more if employed
It causes social problems-benefits could be spent elsewhere
There is less tax revenue for the government
It is personally bad- low self esteem or addiction problem/anti social behaviour
What is the balance of payments?
The difference between the value of exports and imports.
Exports>imports = surplus
Exports
What is taxation?
A compulsory payment to the government.
What are indirect taxes?
A tax on expenditure/ spending. Paid by the suppliers of the goods.
Eg, VAT, stamp duty, tobacco/alcohol/ Peterson tax
What are direct taxes?
Taxes on income and profits, paid by the bearer to the tax authorities.
Eg, national insurance, income tax, corporation tax
What is income tax?
A tax taken out of a persons income- progressive in the uk
What is national insurance?
It is taken as a contribution towards state pension and treatment under the NHS- employer also contributes.
What is VAT?
Value added tax- collected via the selling price and passed on to the government. If a business is registered they can reclaim VAT
What is corporation tax?
A tax on profits made by incorporated companies decided by the government (currently 19%)
What is a subsidy?
Payments by the government to suppliers. To increase supply of particular goods
What is monetary policy?
Manipulation of the level of demand in the economy using the rate of interest (controlled by the Bank of England)
What does an increase in interest rates do and vice versa?
Increase- slows down spending, increases saving (high interest, strengths pound)
Decrease- encourages spending, reduces saving (low interest, weakens pound)
How long does a change in interest rates take to have an impact?
18 months
What is fiscal policy?
Is economic policy conducted by the gov through taxation and public spending. It effects demand in the economy
What effect will increased taxation and less spending have? And vice versa?
More tax- less people will spend, more demand
Less tax- more people will spend, less demand
What do supply side policies do?
Aim to improve the economies overall productive capacity.
Examples of supply side policies?
Investment in education and training, reduce welfare benefits, income tax cuts, cuts in corporation tax, removing expensive/unnecessary business regulation, encouraging business start ups.
What is the business cycle?
The pattern of increases and decreases in economic growth over the long term (measured by a % change in GDP)
What happens during a recession or slump?
Cheaper products/ businesses will do better, some will stay the same (necessities), businesses will cut back on investment+ dividends+ production, move to a cheaper supplier or premises, reduce stock holding, stop excess promotional campaigns
What happens during a boom/ recovery?
Increased demand and spending, invest more, increase premise size or change location, increase prices, sell shares
Political factors- what is the EU?
The economic and political union of most European states aimed at reducing trade barriers and harmonising economic policy.
What’s free trade?
An agreement between countries to trade with each other without erecting barriers (tariffs and quotas).
What are political factors affecting businesses?
Leaving the EU, competition policy (the cma), privatisation, renationalisation, minimum wage decisions
Social- what are demographics?
The characteristics of human population groups eg the size of the population
What social factors should businesses consider?
Changing demographics, changing tastes and habits, changing lifestyles, how the workforce is changing, changes in employment patterns, the role of women,attitudes to work and social habits
What are types of environmental problems?
Air pollution, destroying habitats,noise pollution, water pollution, congestion and using natural resources
What are some gov measures to increase sustainability?
Congestion charges- charged for being in congested area, sustainable development strategy- introduced a landfill tax, tax allowances for using environmentally friendly methods and recycling schemes
What is ethics?
It is concerned with the judgement whether something is morally right or wrong.
What are some benefits of ethical behaviour?
Attract new and better employees, encourage employees to stay, encourage investment, create positive publicity, increase amount of customers/ sales
What are disadvantages of ethical trading?
Increased cost, danger of building up false expectations, less competitive price, different judgements so wont necessarily please everybody
Legal- what is the national minimum wage and living waage?
Minimum-the min pay per hour of workers of school leaving age are entitled to by law
Living- min wage rate for those 25+
What are the costs and benefits of complying with wage rates?
Costs- being fined £14m, having to reimburse workers
Benefits- wont have extra costs that aren’t planned, good reputation, motivated workers
What is the consumer rights act?
Goods have to be of satisfactory quality, fit for purpose and match the description
What are the return rights for a customer before 30 days,after 30 days and how long do they have to complain?
Before 30 days- complete refund
After- partial refund, repair or exchange (choice to offer full refund)
6 years if reasonable for that product eg laptop
What is intellectual property? A trademark? A copyright?
Property- intangible property that is the result of creativity
Trademark- a company can register a trademark for its businesses name, slogans, logos and other items identifiable with the brand.
Copyright- legal protection against copying for authors, composers and artists.
What is the FCA?
The financial conduct authority that regulates financial markets eg pensions, loans, insurance, direct debits, credit cards, children’s ISAs
How does the fca regulate the market?
Give customers info, create legislation, keep them moral and honest, keep the competitive by informing customers so they can chose better
What is hardware and software?
Hard- physical parts of a computer
Soft- all the instructions that tell hardware how to perform a task- programs or apps
What are some advantages of technology?
Systems are faster and more efficient, communication is easier, long run cost will be reduced, convenience for customers
What are disadvantages of technology?
High initial costs, may lead to job losses, not always reliable, staff need to be trained, demotivated staff
What is globalisation?
It is the increased integration and interdependence of national economies or the world coming together to trade in each other’s markets.
What is a multinational?
A business that has activities and operations in more than one country.
What are benefits of being a multinational?
Economies of scale can be obtained, take advantage of lack of legal constraints, enter less competitive markets, take advantage of lower wages
What are some positive effects of globalisation?
Creating jobs in LEDCs, gives skills to workers, investment in local infrastructure, utilise local resources
What are some negative effects of globalisation?
They are unskilled jobs, low wages, unsafe conditions, child labour, effects local businesses, people in MEDCs lose jobs, income goes back to domestic country.
What is a brand and a global brand?
Brand- a distinctive product to differentiate it from other businesses.
Global- a brand that is recognised across most of the world.
How can global brands effect local and national businesses?
Positive- their presence may bring in people to the area and they may use local suppliers
Negative- businesses driven out (loss of customers), downward pricing pressure
What are some challenges to globalisation?
Increased competition, differences in moral/ethical views, costs, adapting to different cultures, mastering marketing, communication, the physical distance
What is international trade?
Selling across borders ie the exchange of goods and services between countries.
Why do countries trade internationally?
For variety, economic efficiency, to grow, avoid conflict and to specialise.
