The External Environment (Part 2)

Question 1

Define microeconomics

Answer 1

Is the study of decisions made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services.

Question 2

Define globalisation

Answer 2

Is the spread of products, technology, information and jobs across the nation.
OR
The process of integration between countries - greater flow of capital, labour, goods and services among them.

Question 3

What happens if the UK does not except the deal with EU?

Answer 3

Would have to go onto world trade organisation (WTO) terms - 10% duty on imports and exports.

Question 4

What is the G7?

Answer 4

Is an intergovernmental organisation made up of the world’s largest developed countries such as: France, UK, Japan, Canada, Italy, US and Germany

Question 5

What is WTO?

Answer 5

Is the only global international organisation dealing with the rules of trade between nations.
OR
Is the only global international organisation dealing with the global rules of trade

Question 6

What does the World bank predict?

Answer 6

Predicts that BRIC countries will over take G7 by 2035.

Question 7

What are the BRIC(S) countries?

Answer 7

Brazil, Russia, India, (South Africa) and China

Question 8

What are the MINT countries?

Answer 8

Mexico, Indonesia, Nigeria, Turkey

Question 9

What are MINT country identified as?

Answer 9

The countries on the way up

Question 10

Where do 40% of the world’s population live in?

Answer 10

In BRICS countries

Question 11

What is 25% of the world’s land?

Answer 11

Are these 5 countries (BRICS)

Question 12

Define IMF

Answer 12

International Monetary Fund (IMF) is an organisation of 190 countries, that oversees the IM system and monitors the financial and economic policies of its members.

Question 13

What does IMF say about China?

Answer 13

Leading source of imports for 70 countries

Question 14

What country in BRICS dominate the export of goods?

Answer 14

China

Russia - mostly energy (gas & oil)

Question 15

What are the population sizes of MINT, Europe (inc UK) and BRICS in 2020?

Answer 15

MINT - 693m
Europe(inc UK) - 741m
BRICS - 3237m

Question 16

What are the main reasons that have caused globalisation?

Answer 16

Improved transport - e.g. rapid growth in air travel -> greater movement of people and goods across the globe

Improved technology - easier to communicate and share info across the globe

Increased mobility of labour - people are more willing to move between countries in search for work

Improved mobility of capital - General reduction in capital barriers -> easier for capital to flow between different economies.

Reduced tariff behaviours - encourage global trade

Question 17

What are the main factors that caused globalisation?

Answer 17

Technology
Capital mobility
Multinational companies
Labour mobility
Lower tariffs
Improved transport

Question 18

Define demand

Answer 18

The relation between demand and price for normal goods
OR
Economic principle - consumer’s desire to purchase goods and services and the willingness to pay a price for a specific G & S.

Question 19

What does the law of demand state?

Answer 19

e.g. As the price of a product increases, people will want less of it

Substitution effect (-ve effect): Decrease in sales of a product - consumers switching to cheaper alternatives

Income effect (-ve affect): Is the change in demand for a G or S based on their income

Question 20

What are the factors that determine the demand for goods?

Answer 20

Taste and preference
Disposable income
Changes in price
The expectation of future price changes

Substitute goods: Are two alternative goods that can be used for the same purpose (i.e., one £ increase -> demand for the substitute rise)

Complementary goods: Is a product or service that adds value to another (i.e., demand increase as the price of another decrease)

Question 21

Define supply

Answer 21

The relationship between supply and price
OR
The total amount of of a specific G or S that is available to consumers

Question 22

What does the law of supply state?

Answer 22

All other factors being equal, as the price of a G or S increases, the quantity of G or S offered by suppliers increases and vice versa.

Question 23

What are the factors that determine the supply for goods?

Answer 23

Profitability of alternative products

More firms - increase in no. of producers will cause an increase in supply

Productivity of workers - motivated (incr in output and supply)

Government subsidies - Increase in gov subsidies will also reduce the cost of goods

Costs of production - main reasons include: technology, input prices, gov policy etc.

Environment/weather

Question 24

What are the main types of market structure?

Answer 24

There are four main types of market structure:
Perfect competition
Monopolistic competition
Oligopoly
Monopoly

Question 25

What are the market structures concentration ratio?

Answer 25

Perfect competition: very low CR
Monopolistic competition: <40% for the 5 firm measurement
Oligopoly: >40% for the 5 firm measurement
Monopoly: 80-100% 5 firm measurement

Question 26

Define Porters fiver forces

Answer 26

Is a framework for analysing a company’s competitive environment

Question 27

What is involved in Porter’s five forces?

Answer 27

Competitive rivalry, threat of new entry, buyer power, threat of substitution, supplier power

Question 28

Why is Porters five forces used?

Answer 28

Strategic

Looks at how attractive or competitive position is of a business/market/industry

Helps organisations understand the factors affecting profitability in a specific industry, and can help to inform decisions to (i.e., increase capacity in a specific industry etc.)