topic 2.3.5 Flashcards
define economic influences?
Economic conditions affect consumer behavior, business costs, and profitability
define inflation?
the rate at which prices of goods and services increase over time
what are the causes of inflation?
When demand exceeds supply, pushing prices up
When production costs increase, forcing businesses to raise prices
what are the negative and positive effects of inflation on a business?
Negative Effects:
Higher costs – Increases in wages and raw materials
Lower consumer spending – People have less disposable income
Uncertainty – Businesses struggle to plan for the future
Positive Effects:
If inflation is moderate, businesses can increase prices and boost revenue
If businesses have fixed-rate loans, the real cost of debt decreases
define exchange rates?
The value of one currency compared to another
what is appreciation and depreciation?
Appreciation:
Exports become more expensive, reducing demand for UK goods abroad.
Imports become cheaper, reducing costs for UK businesses that rely on foreign suppliers.
Depreciation:
Exports become cheaper, boosting demand from foreign customers.
Imports become more expensive, increasing costs for businesses importing goods.
define intrest rates?
The cost of borrowing money and the reward for saving
define taxation?
Governments collect taxes
define the business cycle?
The natural fluctuation in economic activity over time
what are the four stages of the business cycle?
Boom
Downturn
Recession
Recovery (Growth resumes)
Demand increases, investment returns.
explain the four stages of the business cycle?
Boom: high levels of consumer spending business confidence profits and investment prices and costs also tend to rise faster. Unemployment tends to be low as growth in the economy creates new job
Recession: falling levels of consumer spending and confidence mean lower profits for businesses, which starts to cut back on investment. capacity increases + rising unemployment as businesses cut back and reduce stock
Slump / depression - aprolonged period of declining GDP; very erak consumer spending and businesses investment many business failures rapidly rising unemployment prices may start falling
Recovery—things start to feel a little more confident and start to invest again and build stock but it takes time for unemolyment to stop growing
define legislation?
Laws protect consumers, employees, and the environment while ensuring fair competition
what is consumer protection law?
Ensure fair treatment and prevent false advertising, unsafe products, or unfair contracts
what is employee protection law?
Ensure fair wages, safe working conditions, and job security
what is environmental protection laws?
Reduce pollution, waste, and environmental damage.
what is competition policy?
Prevents monopolies and unfair business practices
what is health and safety laws?
Protect workers from injury and hazards
how can competition affect a business?
- Number of Competitors
More competitors = harder to gain market share
Fewer competitors = higher pricing power
- Size of Competitors
Small businesses – More flexible but fewer resources
Large businesses – Economies of scale but slower to adapt
- Competitor Behavior
Price Wars – Companies lower prices to attract customers
Product Innovation – New features to differentiate products
Marketing Strategies – Promotions, advertising
