Theme 3 - External Enviroment

Question 1

What is meant by external environment

Answer 1

Factors outside the business’s control that will affect its costs and demand

Question 2

Factor - competition

Answer 2

Lots of competition means higher marketing is needed which means higher costs
Limited competition means less marketing needed so lower costs
Lots of competition means demand will fall and PED will be elastic
Limited completion means higher demand for you and your PED will be inelastic

Question 3

Factor - incomes

Answer 3

If income is increasing, this means labour costs would increase meaning costs will increase
If incomes are increasing, there will be higher demand for those luxury goods