Managing Business Activities - External Influences

Question 1

What is The Business Cycle?

Answer 1

These are the regular fluctuations in the level of output in the economy, with periods of rapid, slow, static and sometimes negative growth…

Question 2

What is a BOOM?

Answer 2

This is the peak of a business cycle (rapid growth) where economic activity is very high and reaches a peak.

Question 3

What can a BOOM result in?

Answer 3

A boom can result in low unemployment and economic spending is high.

Question 4

What is a RECESSION?

Answer 4

This is a fall in economic activity, and unemployment is high with low spending.

Question 5

How might an economy fall into a RECESSION?

Answer 5

1. A BOOM may result in shortages or reduced investments in machinery and expansion, and so prices may start to rise which could enable the economy to move into a recession.
2. Consumers may no longer be motivated to spend if they are pessimistic towards job insecurity or falling wages.

Question 6

What is a RECOVERY?

Answer 6

This is where an economy begins to experience growth and economic activity improves with more confidence and investments by business and consumer spending.

Question 7

What are the impacts of competition on a business?

Answer 7

1. Price tends to be lower as firms use competitive pricing and marketing and non-price factors to compete and attract customers.
2. Profits as a result of substitutes and lower prices tends to be lower also than in less competitive markets.
3. Product ranges between competitors tend to be similar.