External influences Flashcards
Interest rates
Tells you the cost of borrowing or return on savings
Changes in interest rates will affect a businesses costs if it has a loan or mortgage
High Interest
Most consumers have less money to spend - people with existing borrowing have to pay money back in interest so they have less disposable income and so market demand will decrease
Inflation
is an overall increase in the price of goods and services within an economy
Demand pull inflation
There is too much demand
Happens when theres an increase in disposable income so people buy more and businesses cant supply goods so increase their prices
Cost push inflation
When rising costs push up prices. Employee wages rises can make prices go up especially if productivity isnt rising
Can make profit margins decrease if business decide not to put up their prices
Rate of inflation
This is the percentage change in the price of goods and services within an economy in one year compared to previous years
What happens to exports if inflation increases
Exports will become more expensive abroad so uk businesses become less competitive globally.
Inflation if it become to high its bad for the economy
Deflation
overall decrease in the price of goods and services within an economy
Not enough demand so businesses reduce their prices
what does it cause
causes a fall in productivity because businesses wont supply the market goods that nobody wants
Calculation for index numbers
average value divided by base value x 100
Government spending
spending on the public sector on goods and services
Business cycles have 4 phases which include
Boom - GDP is high = as production reaches maximum capacity there are shortages and price increases (wages rises)
Recession - incomes start to go down and demand decreases. Business confidence is reduced
Slump - GDP is low = businesses close factories and there are a lot of redundancies. Unemployment is high = a lot of business become solvent or go bankrupt
Recovery - production increases and unemployment increases. people have more money to spend
Direct discrimination
treating someone less favourably because they have a protected characteristic e.g. not employing someone because they have a disability
Indirect discrimination
When someone is treated the sake but it has a worse effect on one group of people than on others e.g. rule that employees cant wear a head covering this could be against different religions
Competition
increase in competition means that businesses might lose customers. they could increase their marketing costs or spend more on improving their products. this will benefit the consumers as it brings new innovative products into the business. also reduce prices of existing products
