Theme 2 Section 10 External Influences Flashcards
Interest Rates
Cost of borrowing return on savings.
Inflation
Overall increase in price of goods, services.
Demand-Pull Inflation
Too much demand, increase in disposable income, can’t supply goods quickly, price increases.
Cost-Push Inflation
Rising costs push up prices, wages increase, prices do too.
Deflation
Overall decrease in goods/services, not enough demand, reduce prices.
Consumer Price Index and Formula
Measure inflation in a country, index numbers to track changes in average cost.
Average Value of basket/Base value of basket x 100
Average Value of Basket Formula
Index Number/100 x Base value of basket
Exchange Rate
Value of one currency in another.
Exchange Rate €1.41 to £1, £47 to euros
£47 x 1.4 = €66.27
Exchange Rate €1.41 to £1, €320 to pounds
€320 ÷1.41 = £226.95
Comparing Exchange Rates and Formula
Different Base Rate, change of staring value 100, easier to compare rates.
Exchange Rate/Base change Rate x 100
Government Spending
Influencing economy, social services, health, controlled expenditure welfare benefits, more money (or less) to spend, demand goes up (or down).
Taxation Rates Affecting Economic Activity
High Tax Rates reduce consumer disposable income, spend less, reduce business turnover,low tax rates make bigger profits.
Gross Domestic Product
Measure of value of all final products in a country.
Business Cycle Diagram
Boom, GDP is high, capacity reaches maximum.
Recession, income, demand goes down.
Slump, GDP is low, high unemployment.
Recovery (upswing) production, employment increases.
Income elasticity of demand,(luxury)shoot up in recovery, dives down unto recession.
Changes In Business Cycle
Booms, raise prices, increases profit, slows down demand.
Recession, redundant, save wage costs, increase capacity.
Local Recession, market goods in different area.
National Recession, market goods overseas.
Microeconomy
Individual consumers and firms, make up specific market
Macroeconomy
Economy as a whole (businesses, consumers).
Microeconomic uncertainty
New competitor, uncertainty over customers
Shortage, raw materials, supplier change prices, affect costs.
Macroeconomy Uncertainty
Change in government, uncertainty over spending
Leaving Trade Agreement, future exchange rates.
Trade Descriptions Act (1968)
Don’t mislead consumers with false descriptions on packaging/advertising material.
Sale of Goods Act (1979)
Goods must be fit for purpose, satisfactory quality.
Consumer Protection Act (1987)
New Consumer goods must be safe, sofa, chair fire resistant.
Data Protection Act (2018)
stops misuse of data, holding onto customer data, specified purpose.
Climate Change Act
Report to Greenhouse gas emissions in annual reports. If made public businesses reduce them.
Environment Agency
Protect/Improve environment, regulate businesses that release pollutants in water/land.
Pollution into air, local authorities.
LandFill Tax (1966)
Reduce amount of waste dumped into landfill sites.
Fair Competition
Provide good quality products, reasonable price.
Competition Ac (1998)
Prevent businesses breaking competition laws, if so prosecuted or fined.
Equality Act 2010
Protest employees from discrimination age,,gender, race (protected characteristics.
Direct Discrimination
Treating less favourably , protected characteristic, disability or gender.
Indirect Discrimination
Treated the same, worse effect on one group, not wearing head coverings, against religion.
Recruitment
Justify who to employ without discriminating.
Pay
Male and Female workers same pay for equal value work.
Promotions and Redundancies
Everyone should have same opportunity to get promoted.
Can’t deliberately select staff to make redundant, disabled.
Employment Tribunal
Employees feel been treated unfairly by employers, create a case, employer may pay compensation, job back.
National Living Wage
Controversial, lower than independently calculated living wage, employers pay this, increases motivation.
European Working Time Directive
Full-Time workers 28 days of paid holiday per year, bank holidays.
Health and Safety at Work Act (1974)
Safe working environment, electrical equipment, machinery safe.
Health and Safety Executive
Inspecting, reinforcing health and safety years, construction company providing barriers.
High Competitive Market for Business
May lose customers avoid by, spend more by improving products.
High Competitive Market for Customers
New and Innovative customers products, reduce prices of existing products.
Perfect competition
Firms producing identical products, similar price, keep prices low but high quality, keep customers.
Oligopoly
Small number of large firms, marketing, brand image, high marketing costs. Apples IOS,Google Android. similar expensive prices.
Monopoly
One business has full control , no competition. Increase prices, demand doesn’t decrease, marketing costs low.
Market Size
Number of buyers and number of sellers within a market.
