Theme 2 external Influences Flashcards
Definition of inflation,exchange rates, interest rates and the business cycle
I- the rate of increase in prices over a given period of time.
E- the price of one country’s currency expressed in the terms of another country’s currency.
IR- the percentage of an amount of money that is paid for its use over time.
BC- economic fluctuations between periods of expansion and contraction, factors such as consumer spending influence what stage in the cycle a business is at.
When uk exporting products to America how is the business affected when the appreciation of the pound against dollar and depreciation.
A- exports will become more expensive so will now have to lower price.
D- exports become cheaper so will need to produce more as demand will go up.
How uk business importing raw material for, a,Erica be affected by appreciation of pound and depreciation.
A- imports now cheaper business can by more or the same either way reducing costs.
D- Imports now more expensive will have to buy less or seek materials from somewhere else.
Positive and negative effects on business if:
Inflation -high revenues and profit for expansion of growth, less consumer spending income in fixed incomes so buying less.
Exchange rates + may increase import export opportunities, -might decrease opportunities.
Interest rates+ might lower costs if loan repayments decrease-might increase costs if repayments increase.
Taxation + lower taxation may lower costs so higher profits, - higher taxation may increase costs so limit supply.
Government spending + supplying government will increase government spending, -if spending is cut may have to look elsewhere for sources of spending.
Business cycle+ recovery and boom lead to increase consumer confidence and spending, -recession and slump show lower consumer confidence and spending.
2 effects of economic uncertainty
Lower invest emit from banks and businesses reducing output
Lower levels of demand reducing consumer spending.
One effect on a business form following these legislations:
Consumer protection - increase costs as products return and need more detail to quality.
Employee protection - increased costs in relation to wages and time.
Environmental protection - enhanced reputation form committing to reducing carbon footprint.
Competition policy- increased chance if sevruga for small businesses ad large business can’t use predator pricing.
Health and safety- increased costs to implement new policies to protect customers and employees.
Three ways businesses could respond to increased competition in market:
Lower prices
Differentiate/ create new usp
Add more value
Two ways in which market size can influence competition:
Larger markets can attract new entrants
Smaller markets are more attracted to niche products where value is more relevant than price.