Topic 1.5.4 The economy and Business

Question 1

Impact of economic climate on business?

Answer 1

Changing levels of consumer income-Amount of money consumers have left after they have paid their taxes and living expenses.
When consumer income rises,consumers people tend to have more money which leads to higher levels of consumer spending.Consumers tend to buy more expensive goods and services(luxuries) when they have lots of money.
When consumer income reduces,people are not earning as much money so may spend less money or buy cheaper products.
Less revenue and profit

Question 2

Unemployment

Answer 2

Unemployed people have less disposable income to spend on business which results in less revenue and less profit.
-When unemployment is low,businesses produce more luxury products.

Question 3

Government taxation

Answer 3

Business costs increase and prices tend to increase
-When low,business costs decrease and prices tend to increase.

Question 4

Changes in exchange rates

Answer 4

When pound is high,imports are cheap meaning more consumer income and exports are expensive.
-When pound is low,imports are expensive,meaning less consumer income,exports are cheap.

Question 5

Changes in interest rates

Answer 5

-Costs increase if interest rate increases
-Costs decrease if interest rates decrease

Question 6

Inflation

Answer 6

Higher costs for business,higher prices for consumers.This leads low customer attraction because they are more higher prices.As a result less revenue and profit.