External Influences Flashcards
In what three ways are businesses affected by exchange rates?
Exporting goods to a foreign country
Importing inputs from a foreign country
Foreign competitors
What is an exchange rate?
The price at which one currency can be traded for another.
What are the consequences of an exchange rate rise?
Value of currency increases.
Exporters prices increase.
Imported raw materials cheaper.
Foreign competition more effective in the UK.
What are the consequences of an exchange rate fall?
Value of currency increases.
Exporters prices decrease.
Imported raw materials more expensive.
Foreign less effective in the UK.
Why might a government want to take action against a business that imports goods from foreign countries?
If the price of a country’s exports rises by a smaller rate than that of its imports, smaller revenues are made from exports which provides less of a demand for the country’s currency, reducing its value.
Valuable currency= higher export prices, lower import prices, more effective foreign competition.
What are ethics?
The moral principles that should underpin decision making.
Business ethics can provide moral guidelines for conduct of business affairs.
What is a social cost of production?
When any business causes a negative impact on a third party as a result of its activities.
What is a social benefit?
When the beneficial things that a business provides to a third party out weigh the social costs imposed on them.
What determines whether a business is ethical or not?
How the company deal with their social costs and whether it provides a social benefit.
What are the advantages of being ethical?
Improved reputation (marketing advantage).
Can sell at higher prices due to higher costs.
Improved recruitment and retention of staff.
More motivated employees.
What are the disadvantages of a business being ethical?
Increased costs
Loss of profits
Conflict with existing policies
Why is there competition between consumers and firms?
Consumers want to buy goods as cheap as possible, whist firms want to maximise profits.
What is perfect competition?
A market with a lot of competition (e.g. Hairdressers).
What does the term ‘monopoly’ mean?
When a market contains no competition, and one business holds the majority of the market share (e.g. Post office).
What is the business cycle?
The growths and falls in the output of ALL businesses.
What does GDP stand for?
Gross domestic product (the value of goods and services)
What is economic growth?
An increase in the value of goods and services produced by an economy over time.
What happens to the economy in an economic boom?
Profits increase, costs and prices increase, people have more confidence, increased amount of jobs, higher wages.
What happens to the economy during an economic recession?
Falling levels of spending, low confidence means lower profits, wages decrease and unemployment gets higher.
What happens to the economy during an economic recovery?
Things start to improve.