Why do businesses need to respond to changing economic conditions ?

Economic factors can present significant opportunities and threats . Businesses that anticipate and respond to them maximise their chance of success .

Define interest rate .

An interest rate is the percentage reward for saving money and the percentage charged for borrowing money.

The rates that UK lenders charge for borrowing are determined by the Base Rate, which is set by the _____________.

The rates that UK lenders charge for borrowing are determined by the Base Rate, which is set by the Bank of England .

How do rising interest rates affect a business's costs ?

Businesses pay more on new loan repayments , which increases their costs .

True or False? Rising interest rates usually lead to higher sales of goods bought on credit.

False. When interest rates are high, customers are less likely to buy goods on credit , so sales tend to fall .

Why might high interest rates slow a business's growth ?

Businesses may be less willing to make capital investments and choose to save their money instead, which may reduce their rate of growth.

Define level of employment .

The level of employment is a measure of the proportion of people aged 16 to 64 who are in employment .

True or False? A rising employment rate makes it cheaper for businesses to recruit workers.

False. As employment rises, the supply of available workers falls , so businesses often have to offer higher wages or salaries .

How might a business respond to staff shortages when employment is high?

A business might import labour from abroad or invest in training to upskill its existing workers.

True or False? High levels of employment can increase sales of luxury goods.

True. When employment is high, more customers have disposable income to spend, which can drive demand for luxury goods .

Define consumer spending .

Consumer spending is the total amount of money spent on goods and services by individuals and households for personal use .

Low-income households spend a greater proportion of their income on _________ such as housing and groceries.

Low-income households spend a greater proportion of their income on necessities such as housing and groceries.

How has lower consumer spending affected businesses selling non-essential goods ?

Businesses selling luxury and non-essential goods have experienced lower sales . Some have introduced flexible payment options so customers can pay in instalments.

GCSEBusinessAQAFlashcardsInfluences on BusinessThe Economic Climate

The Economic Climate (AQA GCSE Business): Flashcards

Exam code: 8132

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Why do businesses need to respond to changing economic conditions?

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Cards in this collection (13)

Why do businesses need to respond to changing economic conditions?
Economic factors can present significant opportunities and threats. Businesses that anticipate and respond to them maximise their chance of success.
Define interest rate.
An interest rate is the percentage reward for saving money and the percentage charged for borrowing money.
The rates that UK lenders charge for borrowing are determined by the Base Rate, which is set by the _____________.
The rates that UK lenders charge for borrowing are determined by the Base Rate, which is set by the Bank of England.
How do rising interest rates affect a business's costs?
Businesses pay more on new loan repayments, which increases their costs.
True or False?
Rising interest rates usually lead to higher sales of goods bought on credit.
False.
When interest rates are high, customers are less likely to buy goods on credit, so sales tend to fall.
Why might high interest rates slow a business's growth?
Businesses may be less willing to make capital investments and choose to save their money instead, which may reduce their rate of growth.
Define level of employment.
The level of employment is a measure of the proportion of people aged 16 to 64 who are in employment.
True or False?
A rising employment rate makes it cheaper for businesses to recruit workers.
False.
As employment rises, the supply of available workers falls, so businesses often have to offer higher wages or salaries.
How might a business respond to staff shortages when employment is high?
A business might import labour from abroad or invest in training to upskill its existing workers.
True or False?
High levels of employment can increase sales of luxury goods.
True.
When employment is high, more customers have disposable income to spend, which can drive demand for luxury goods.
Define consumer spending.
Consumer spending is the total amount of money spent on goods and services by individuals and households for personal use.
Low-income households spend a greater proportion of their income on _________ such as housing and groceries.
Low-income households spend a greater proportion of their income on necessities such as housing and groceries.
How has lower consumer spending affected businesses selling non-essential goods?
Businesses selling luxury and non-essential goods have experienced lower sales. Some have introduced flexible payment options so customers can pay in instalments.

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