paper 2 6.2 economic climate Flashcards
what is economic climate
state of the economy the business operates in
what is income
amount of money people receive from work, assest they own
what usually happens when consumer income goes up
people have more money so spending rises businesses sell more busineses my raise prices
what is level of employment
number of people in work
what is the link between employment and income
when employment rises usually a rise in income, and vice versa
what is GDP
gross domestic product - amount of goods and sevices a country produces in a year - influences the countries level of income
what is economic growth
a period of time when GDP in a country is rising and the speed at which economic growth occurs is usually expressed as a %
what is it called when GDP of a country falls
recession
what happens in a recession
incomes fall
businesses can not sell as much and so cut production,
may have to lay off workers so employment falls and unemployment rises income falls and reduces customer spending
what is the impact of a recession on economic growth give an example
it falls and may not recover for a long time
recession in uk 2009
not until 2013 uk began to produce more goods than it did before recession
employment rose slowly
new jobs were not well paid
how can rising incomes lead to decrease in sales
firms that produce cheaper low end products may see fall in sales as customers can afford more expensive products
give an example where a business saw profits and sales rise even though incomes have fallen
aldi set up as a cheaper alternative and cut back and passed savings on to suctomer
what will influence how much a business will be effected by a change in income (4)
1 how much the income changes - bigger the change the bigger the effect
2 the type of product the business sells - sell expensive products may have large fall in sales
3 how other businesses respond to the change in income - other supermarkets were effected by Aldi gaining market share
4 how the business itself responds to change in income - good business will adapt and can survive and thrive example JLR - increase markets in other places when china stopped buying
what is the impact of changes in employment
if employment changes may effect production and costs and reduce profit
why do production and costs rise if employment changes
if employment rises and firms need to hire staff they mau struggle as their will be a shortage of skilled workers creating competition and businesses may have to offer higher pay to attract them - this will increase the cost of production and reduce profit
