What is a business? - 1.3 Flashcards
How can the external environment affect costs and demand?
For example, it can affect demand by a product becoming popular or can affect costs by interest rates falling.
How can competition affects costs and demand?
Competitors offering similar products at lower prices can lead to a decrease in another company’s demand. A new competitor can result in existing producers facing higher costs.
How can market conditions affect costs and demand?
Some markets are vulnerable to larger changes in demand. A major business leaving a specific market leaving its customers available to remaining businesses.
How can income affect costs and demand?
A rise in the level of incomes means an increase in sales. It can also affect costs of production as wages increase meaning businesses face sharp increase in costs.
How can interest rates affect costs and demand?
An increase in interest rates could mean consumers are more likely to save and reduce demand. A rise could also mean costs of production increases as most businesses borrow money.
How can demographic factors affect costs and demand?
An increase in population means there is an increase in housing clothing and food. Also ageing means there is more of a demand for products targeted towards older people.
How can environmental issues affect costs and demand?
There are fines on firms who breach legislation relating to the protection of the environment. Being environmentally friendly also means an increase in recognition and possibly the opportunity to charge higher prices.
