Operating in the external environment

Question 1

How do market conditions impact on cost and demand

Answer 1

Cost : economic growth will result in more disposable consumer income, therefore more products sold, therefore increase capacity to keep up with demand

Demand : economic growth will result in more disposable consumer income, increasing demand as consumers have more money to spend

Question 2

How does the environment impact on cost and demand

Answer 2

Cost : environmentally friendly products are more expensive to source from suppliers therefore increasing costs, it can lower costs in the long term as businesses won’t have to pay waste disposable charges due to changes in law

Demand : complying with environmental regulations improves a brands reputation therefore increasing demand, however not complying can lead to loss of customer

Question 3

How does fair trade impact on cost and demand

Answer 3

Costs : buying the products for a higher price will increase variable costs

Demand : businesses supporting fair trade will have a better brand image resulting in more customers

Question 4

How does income impact on cost and demand