The Economy & Business Flashcards
All 16 cards in this deck
Give one impact on a small business of a rise in unemployment.
Demand falls because customers have less money to spend; but recruitment becomes easier as more people are looking for work.
How does a rise in consumer incomes usually affect demand for luxury products?
Demand rises, because consumers have more disposable income to spend on luxuries.
What is inflation?
A general rise in the price level, meaning money buys less than before.
Give one way inflation affects a small business.
Suppliers raise the price of materials, so costs rise and the business makes less profit per unit or must raise its prices.
How can a rise in interest rates affect a business with a loan?
If the loan has a variable interest rate, the cost of borrowing rises, so repayments increase, leaving less profit and making expansion harder.
How does a rise in interest rates affect consumer demand?
Demand falls, because customers pay more on loans and mortgages so have less disposable income.
What is one impact of a decrease in interest rates?
Borrowing becomes cheaper, so customers are likely to borrow and spend more and demand may rise; a business with a loan also pays less interest.
How does an increase in government taxation on business profits affect a business?
It keeps less retained profit, so it has less to reinvest in the business.
What is an exchange rate?
The value of one currency in terms of another currency.
How does a rise in the value of the pound affect a UK business that imports goods?
Imports become cheaper, so the business pays less for goods bought abroad and its costs fall.
How does a rise in the value of the pound affect UK exporters?
UK goods become more expensive abroad, so demand and sales from overseas customers fall.
Why does a fall in the value of the pound help a UK exporter?
Overseas buyers get more pounds for their own currency, so UK goods become cheaper for them and export sales are likely to rise.
What is unemployment?
When people who are willing and able to work cannot find a job.
What is the difference between a fixed and a variable interest rate on a loan?
A fixed rate stays the same for the whole loan; a variable rate can change during the loan, so repayments may rise or fall.
How does a rise in taxes such as income tax or VAT affect consumer demand?
Consumers are left with less disposable income, so demand for most products falls.
How can a rise in inflation affect consumer demand?
If incomes do not rise as fast as prices, each pound buys less, so consumers cut back and demand falls.