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Business Studies > External Influences > Flashcards

External Influences Flashcards

0
Q

In what three ways are businesses affected by exchange rates?

A

Exporting goods to a foreign country
Importing inputs from a foreign country
Foreign competitors

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1
Q

What is an exchange rate?

A

The price at which one currency can be traded for another.

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2
Q

What are the consequences of an exchange rate rise?

A

Value of currency increases.
Exporters prices increase.
Imported raw materials cheaper.
Foreign competition more effective in the UK.

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3
Q

What are the consequences of an exchange rate fall?

A

Value of currency increases.
Exporters prices decrease.
Imported raw materials more expensive.
Foreign less effective in the UK.

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4
Q

Why might a government want to take action against a business that imports goods from foreign countries?

A

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.

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5
Q

What are ethics?

A

The moral principles that should underpin decision making.

Business ethics can provide moral guidelines for conduct of business affairs.

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6
Q

What is a social cost of production?

A

When any business causes a negative impact on a third party as a result of its activities.

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7
Q

What is a social benefit?

A

When the beneficial things that a business provides to a third party out weigh the social costs imposed on them.

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8
Q

What determines whether a business is ethical or not?

A

How the company deal with their social costs and whether it provides a social benefit.

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9
Q

What are the advantages of being ethical?

A

Improved reputation (marketing advantage).
Can sell at higher prices due to higher costs.
Improved recruitment and retention of staff.
More motivated employees.

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10
Q

What are the disadvantages of a business being ethical?

A

Increased costs
Loss of profits
Conflict with existing policies

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11
Q

Why is there competition between consumers and firms?

A

Consumers want to buy goods as cheap as possible, whist firms want to maximise profits.

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12
Q

What is perfect competition?

A

A market with a lot of competition (e.g. Hairdressers).

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13
Q

What does the term ‘monopoly’ mean?

A

When a market contains no competition, and one business holds the majority of the market share (e.g. Post office).

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14
Q

What is the business cycle?

A

The growths and falls in the output of ALL businesses.

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15
Q

What does GDP stand for?

A

Gross domestic product (the value of goods and services)

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16
Q

What is economic growth?

A

An increase in the value of goods and services produced by an economy over time.

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17
Q

What happens to the economy in an economic boom?

A

Profits increase, costs and prices increase, people have more confidence, increased amount of jobs, higher wages.

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18
Q

What happens to the economy during an economic recession?

A

Falling levels of spending, low confidence means lower profits, wages decrease and unemployment gets higher.

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19
Q

What happens to the economy during an economic recovery?

A

Things start to improve.

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20
Q

What are the benefits of economic growth to a business?

A 
Increased profits
A rise in average living standards
The creation of new jobs
Lower unemployment
Increased tax revues for government
Improved business confidence
21
Q

What are the drawbacks of economic growth for a business?

A

The risk of inflation
Increased inequality if they benefits of growth are not evenly distributed
A growing gap between the rich and poor

22
Q

What is a global recession?

A

An extended period of economic decline around the world.

23
Q

What would the benefits be to a business if the UK was to use the Euro?

A

Cost savings of currency exchange
Most trade is with Europe
Stable exchange rate, stabilising the whole economy

24
Q

Why would UK businesses be against the UK using the Euro?

A

Loss of pound (education/confusion)
Adds to costs as everything would need updating
A ‘one policy fits all’ that cannot be reversed.

25
Q

Is being ethical likely to impact on a business’ profits?

A

Not very much since although selling prices will rise, so too will costs.

26
Q

What are the benefits of being a member of the EU?

A 
Freer movement of goods
More suppliers
Freer movement of workers
Cheaper costs
More customers (larger market)
27
Q

What are the problems with the UK being a member of the EU for a business?

A

Environmental laws
More worker rights
More competition
More laws

28
Q

What does the term ‘green belt’ mean?

A

An area of open land surrounding a city where building work is restricted. It is reserved for the public and for recreational purposes, and prevents towns from merging together.

29
Q

What is inflation?

A

A general rise in prices, or a fall in the value of money. It means that year after year, £100 gradually buys less and less.

30
Q

What is the Retail Price Index?

A

This is a ‘basket of goods’ that the average person buys that decides the country’s average level of prices.

31
Q

How is inflation calculated?

A

(PRICE INCREASE (in cost of RPI) / ORIGINAL COST) x100

32
Q

What are the two forms of inflation?

A

Demand pull and cost push.

33
Q

What is an interest rate?

A

The cost of borrowing money (e.g. Loans) or the return for investing money.

34
Q

Who are interest rates set by?

A

The Monetary Policy Comittee of the Bank of England.

35
Q

What is globalisation?

A

The growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers.

36
Q

What are a businesses reasons for going global and what would they have to consider in doing this?

A

New markets/customers - language barriers
Building a global brand - culture
Economies of scale - competition
Spreads risks - logistics

37
Q

What are the benefits if globalisation?

A 
Benefits of trade
Benefits of increased FDI
Competition reduces costs and encourages innovation
Faster spread of technology
Political and social ties
38
Q

What are the costs of globalisation?

A

Can exacerbate inequality
Erodes national cultures
Environmental costs
Domination by MNCs

39
Q

How can the level of unemployment be measured?

A

CLAIMANT COUNT - people on job seekers allowance for past 6 months (no overs 60s or government training schemes)
LABOUR FORCE SURVEY - number of people who have looked for work in the past month and are able to start in the next two weeks.

40
Q

What are the six types of unemployment?

A

Frictional, seasonal, structural, technological, cyclical and classical (real wage).

41
Q

What is frictional unemployment?

A

When a person is in the Middle of moving from one job to another.

42
Q

What is seasonal unemployment?

A

A person is unemployed due to seasonal demands, e.g. A strawberry picker.

43
Q

What is structural unemployment?

A

When the production in the economy is changing, e.g. From car manufacturing to financial services.

44
Q

What is technological unemployment?

A

A person loses their job due to the fact that machines are now able to do the work (mechanisation).

45
Q

What is cyclical unemployment?

A

The cause of unemployment is the cycle of the economy- when the economy is in a recession/slump.

46
Q

What is classical (real wage) unemployment?

A

Wages become too high for a business to continue laying an employee for their work.

47
Q

What are the economic consequences of unemployment?

A

Poor growth
Lower incomes
Worse government finances

48
Q

What are the social consequences of unemployment?

A

Divorce
Poorer health
Lower life expectancy
Widening inequality

49
Q

How can the UK succeed in a global economy?

A 
Produce at the right price (productivity will be key)
Producing the right goods and services
Outsourcing some jobs
Better quality products
High value added
Good marketing
50
Q

How might the government be able to help business, education and training?

A 
Cuts in taxes on business profit
Grants
Cuts in income tax
Education and training
Improve infrastructure

Business Studies (5 decks)

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