Unit:4 The Economic Environment Flashcards
Define market
The market place is any situation in which buyers and sellers come into contact.
Define mixed market economy
Situation where decisions are made not only by businesses and citizens but also by government.
Define supply and demand
Demand: consumers’ wishes to purchase products, backed up by their willingness to spend money on them
Supply: quantities that producers and sellers are prepared to bring to the market
Why is being in a free market an advantage?
- Customers are likely to have more choices because firms are competing => greater variety of brands to the market
- Prices are likely to be lower because companies will compete in pricing, therefore there will be companies with lower pricing.
- Suppliers will provide goods as long as there is enough demand to make a profit
Why do countries trade?
- Countries trade in order to benefit from each other’s resources and skills.
- To acquire items such as scarce metals and minerals, that can only be found in small number of countries.
- To provide greater customer choice
- To earn foreign currency
- To introduce more competition
- To have good relations with other countries.
What are importing and exporting?
- An import is a purchase of products or services from overseas
- An export is a sale pf products or services to individuals or businesses overalls.
What does importing achieve for businesses?
Businesses are able to acquire the best supplies such as raw materials, components, parts and semi finished and finished products.
What does exporting achieve for businesses?
It makes it possible for firms to grow across the world, as it enhances the brand internationally.
What are the main problems of entering the new markets abroad?
- Lack of local knowledge: The business needs to be aware of consumers’ tastes and preferences, rules and laws about what can be produced.
- Contacts: These contacts can be people who help you sell your products of government officials who can explain details of local laws.
- Different cultures and tastes: Many products have to be altered for local conditions.
- Language differences.
What are the ways of entering new markets over seas?
- Make sales visits to countries to sell you products possibly through telephone links or a website. It’s a low cost method, however exporter can only build limited overseas contacts.
- To use an overseas sales agent or partner.
- Setting up a joint venture.
What are the ways of the government intervening in the market for imports and exports? And Define them.
By:
Tariff barriers: Tax levied on imported goods.
Quota: Limitation on the number of goods that can be imported.
What is exchange rate?
The rate at which two currencies will exchange for each other at a particular moment in time.
What happens when the exchange value of currency varies?
When the exchange value of a currency rises (because a more people want to buy that currency) , exports from a particular country become less competitive ( because their products now seem more expensive to other countries). This may reduce profits fir exporters.
What is direct competition?
When firms produce the same or broadly similar goods.
How does level of competition affect the consumers?
The greater the level of competition the more choice consumers have.
