Political Factors Flashcards
(11 cards)
What are political factors that can affect business activity?
- Stability/instability
- Taxation
- Subsidy
- Regulations
- View of political party in power
Political factors may have both positive and negative effects on business activity, depending on the context and specific policies in place.
What role does the government play in providing a stable framework for businesses?
- Managing the economy
- Aiming for low unemployment
- Maintaining stable prices
- Encouraging economic growth
A stable economy allows businesses to plan for the future with greater certainty regarding sales and costs.
Define a subsidy.
A payment from the government to individuals or businesses that reduces their costs of production.
List some examples of sectors that might receive government subsidies.
- Agriculture
- Electric cars
- Green energy
- Oil and gas
- Public transport
Subsidies help ensure producers can sell their goods at competitive prices.
How does a subsidy affect a business?
- Lowers prices
- Increases profit margins
- Attracts customers
- Increases demand
- Facilitates growth and economies of scale
The increased demand can lead to greater success for the business.
What is fiscal policy?
Policies for taxation and public spending.
How does taxation affect consumer behavior?
- Higher income tax reduces disposable income
- Higher VAT increases prices of goods and services
- Higher corporation tax reduces profits available for reinvestment and dividends
These effects can lead to decreased consumer spending and business investment.
What is the impact of public spending on businesses?
- Creates employment
- Increases disposable incomes for consumers
- Creates demand for goods and services supplied to public sector businesses
Public spending can stimulate the economy and support private sector businesses.
What is monetary policy?
Policies to control exchange rates and interest rates.
Discuss how a rise in VAT could affect a supermarket.
Value Added Tax
It would increase prices for consumers, potentially reducing demand for goods.
How can government subsidies lead to increased competition in green energy?
By lowering costs of production for businesses and individuals, allowing them to lower prices and making their products more attractive to consumers.
