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Why do goverments help business? They aid business in the hope that they develop
therefore growing the economy
How do goverments help businesses? <ul><li>Info, training and
advice</li><li>Lowering profit tax</li></ul>
How do governments restrict businesses? <ul><li>Increased profit tax</li><li>Pay
equity</li></ul>
Disadvantages to government assitance? <ul><li>Anti competitve</li><li>Cost to
the government</li></ul>
What is market failure? When a monopoly is created
How do governments respond to monopolies? <ul><li>Imposing fines or higher
taxes</li><li>Create laws which restricts business activity</li></ul>
What does PESTEL stand for?
<ul><li>Political</li><li>Economic</li><li>Technological</li><li>Legal</
li><li>Enviromental</li></ul>
What is privatisation? Where you sell state owned businesses to investors in the
private sector
Advantages to privatisation <ul><li>Greater efficency</li><li>Speed up decision
making</li></ul>
Disadvantages to privatisation <ul><li>Some industries could operate as a
monopoly and exploit customers</li><li>Breaking up of nationalised business will
reduce opportunity for economies of scale</li></ul>
What is nationalisation Where business are taking out of the private sector and
taken over by the government
Advantages to nationalisation <ul><li>Prevents private companies from running their
business as a monopoly</li><li>Economies of scale can be achieved by joining all
private businesses from 1 industry to one big nationalised business</li></ul>
Disadvantages to nationalisation <ul><li>As it is a publicly owned business then
there is less insentive to earn profit meaning lower efficency</li><li>Politics may
get in the way of the business</li></ul>
What is deregulation of markets Reducing government influence on businesses
What does employee protection consist of? (+ 3 examples) <ul><li>To prevent
exploitation and ensure, statutory, contractual rights are enforced.</li></ul>
What does health and safety consist of? (+ 3 examples) <ul><li>Laws to protect
workers from discomfort and physical injury.</li></ul>
Benefits of health and safety? <ul><li>Workers feel more secure</li><li>No
fines</li><li>Brand image</li></ul>
What are the 4 macroeconomic objectives of a government? <ol><li>A target rate of
economic growth (GDP)</li><li>A target rate of price inflation</li><li>Low levels
of unemployment</li><li>Steady exchange rates</li></ol>
GDP definition? <ul><li>Total value of goods and services in a country</li></ul>
Why is growth desirable? <ul><li>Increase in GDP increase the quantity of
goods and services available for consumers raising standard of
living</li><li>Higher level of output -> Increased employment -> Increased
incomes</li></ul>
Factors which lead to economic growth? <ul><li>Increased
output</li><li>Increases in demand for the products in industry</li></ul>
Problems from economic growth? As the economy reaches full
capacity:<br><ul><li>Demand pull inflation</li><li>Labour shortages</li></ul>
What is a recesion? <ul><li>The average rate at which prices are rising (6
months of declining GDP)</li></ul>
Advantages of a recession? <ul><li>Posible loss of competition</li><li>Posible
cost cutting</li></ul>
Label the business cycle "<img src=""paste-
a1b719e5ffc953f2368636ae3b66def2b8f54753.jpg"">"
What happens to luxury goods during economic growth? <ul><li>Increase the range of
goods and services </li><li>Raise prices due to increase in profit
, margins</li></ul>
What happens to luxury goods during a recision? <ul><li>Offer
promotions</li><li>Widen product range with lower - priced products</li></ul>
What should a business do to inferior goods during economic growth?
<ul><li>Extend the product range to include more exclusive or better designed
goods</li><li>Attempt to move the product upmarket</li></ul>
What happens to inferior goods during a recesion? <ul><li>Promote good value or
low prices</li><li>Increase range of outlets</li></ul>
Why can inflation be a problem? <ul><li>Interest rates are
high</li><li>Infaltion causes uncertainty increasing risk</li></ul>
2 main causes of inflation? <ul><li>Demand pull</li><li>Cost push</li></ul>
What is demand pull? Buyers want more than sellers can
produce<br><ul><li>Sellers put prices up </li><li>Reduce demand - higher
taxation and interest rates</li></ul>
What is cost push? Businesses costs start to rise so sellers need to put up
their prices to compensate<br><ul><li>Consumers will find it more atractive to save
more and spend less.<br></li></ul>
Impact of cost push on a business? <ul><li>High exchange rate policy makes imports
more likely - switch supplier</li><li>High interest rates = Discourage business
borrowing, consumer credit down</li></ul>
Impact of demand pull on a business? <ul><li>Demand pull = high tax = reduced
demand</li><li>Progressive tax increase = decreased demand for luxury goods =
change of product mix</li></ul>
Advantages of inflation? <ul><li>Costs passed onto consumers</li><li>Increased
value of assets / decreased debt</li></ul>
Disadvantages of inflation? <ul><li>Cash flow problems<br></li><li>Higher
interest rates</li></ul>
3 types of unemployment
<ul><li>Cyclical</li><li>Structural</li><li>Frictional</li></ul>
What is cyclical unemployment? <ul><li>Occurs in a recesion - due to fall in
demand of output</li><li>Businesses need fewer workers</li></ul>
Government policy towards cyclical unemployment? <ul><li>Control
economy </li><li>Maintain competive rate of exchange - so overseas demand
remains high</li><li>Increase tax, increase interest rates</li></ul>
What is structural unemployment? <ul><li>Certain types of workers cannot find
work even when the economy is booming</li><li>Occurs when there are structural
changes in the economy - e.g. changes in consumer taste</li></ul>
What is frictional unemployment? <ul><li>When someone loses their job - the time
taken to find a new one</li><li>People looking for particular jobs which are not
available anymore</li><li>Changing labour demands of businesses mean not as many
people are needed (capital extensive)</li></ul>
Government policy towards frictional unemployment? <ul><li>Increase job
information</li><li>Reduce unemployment benefits for those that are slow to find
work </li></ul>
What are the costs of unemployment to the country? <ul><li>Produces less goods
and services</li><li>Costs of benefits</li><li>Social problems</li></ul>
What are exchange rates? <ul><li>Price of one currency in relation to another
(Determinded by supply and demand)</li></ul>
Supply of a currency? <ul><li>Imports</li><li>Domestic population travelling
abroad</li></ul>
Who wins when a currency appreciates? <ul><li>Importers of foreign goods - raw
materials and finished goods</li><li>Likely to reduce inflation</li></ul>
Who loses when a currency appreciates? <ul><li>Exporters - companies that sell
goods and services abroad</li><li>Companies that sell goods to domestic market and
that have foreign competition</li></ul>
Who wins when a currency depreciates? <ul><li>Home based exporters - they can
increase the value of their exports</li><li>Sellers to domestic markets will face
less competition from importers </li></ul>
Who loses when a currency depreciates? <ul><li>Manufactorers that rely on
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#tags column:3
Why do goverments help business? They aid business in the hope that they develop
therefore growing the economy
How do goverments help businesses? <ul><li>Info, training and
advice</li><li>Lowering profit tax</li></ul>
How do governments restrict businesses? <ul><li>Increased profit tax</li><li>Pay
equity</li></ul>
Disadvantages to government assitance? <ul><li>Anti competitve</li><li>Cost to
the government</li></ul>
What is market failure? When a monopoly is created
How do governments respond to monopolies? <ul><li>Imposing fines or higher
taxes</li><li>Create laws which restricts business activity</li></ul>
What does PESTEL stand for?
<ul><li>Political</li><li>Economic</li><li>Technological</li><li>Legal</
li><li>Enviromental</li></ul>
What is privatisation? Where you sell state owned businesses to investors in the
private sector
Advantages to privatisation <ul><li>Greater efficency</li><li>Speed up decision
making</li></ul>
Disadvantages to privatisation <ul><li>Some industries could operate as a
monopoly and exploit customers</li><li>Breaking up of nationalised business will
reduce opportunity for economies of scale</li></ul>
What is nationalisation Where business are taking out of the private sector and
taken over by the government
Advantages to nationalisation <ul><li>Prevents private companies from running their
business as a monopoly</li><li>Economies of scale can be achieved by joining all
private businesses from 1 industry to one big nationalised business</li></ul>
Disadvantages to nationalisation <ul><li>As it is a publicly owned business then
there is less insentive to earn profit meaning lower efficency</li><li>Politics may
get in the way of the business</li></ul>
What is deregulation of markets Reducing government influence on businesses
What does employee protection consist of? (+ 3 examples) <ul><li>To prevent
exploitation and ensure, statutory, contractual rights are enforced.</li></ul>
What does health and safety consist of? (+ 3 examples) <ul><li>Laws to protect
workers from discomfort and physical injury.</li></ul>
Benefits of health and safety? <ul><li>Workers feel more secure</li><li>No
fines</li><li>Brand image</li></ul>
What are the 4 macroeconomic objectives of a government? <ol><li>A target rate of
economic growth (GDP)</li><li>A target rate of price inflation</li><li>Low levels
of unemployment</li><li>Steady exchange rates</li></ol>
GDP definition? <ul><li>Total value of goods and services in a country</li></ul>
Why is growth desirable? <ul><li>Increase in GDP increase the quantity of
goods and services available for consumers raising standard of
living</li><li>Higher level of output -> Increased employment -> Increased
incomes</li></ul>
Factors which lead to economic growth? <ul><li>Increased
output</li><li>Increases in demand for the products in industry</li></ul>
Problems from economic growth? As the economy reaches full
capacity:<br><ul><li>Demand pull inflation</li><li>Labour shortages</li></ul>
What is a recesion? <ul><li>The average rate at which prices are rising (6
months of declining GDP)</li></ul>
Advantages of a recession? <ul><li>Posible loss of competition</li><li>Posible
cost cutting</li></ul>
Label the business cycle "<img src=""paste-
a1b719e5ffc953f2368636ae3b66def2b8f54753.jpg"">"
What happens to luxury goods during economic growth? <ul><li>Increase the range of
goods and services </li><li>Raise prices due to increase in profit
, margins</li></ul>
What happens to luxury goods during a recision? <ul><li>Offer
promotions</li><li>Widen product range with lower - priced products</li></ul>
What should a business do to inferior goods during economic growth?
<ul><li>Extend the product range to include more exclusive or better designed
goods</li><li>Attempt to move the product upmarket</li></ul>
What happens to inferior goods during a recesion? <ul><li>Promote good value or
low prices</li><li>Increase range of outlets</li></ul>
Why can inflation be a problem? <ul><li>Interest rates are
high</li><li>Infaltion causes uncertainty increasing risk</li></ul>
2 main causes of inflation? <ul><li>Demand pull</li><li>Cost push</li></ul>
What is demand pull? Buyers want more than sellers can
produce<br><ul><li>Sellers put prices up </li><li>Reduce demand - higher
taxation and interest rates</li></ul>
What is cost push? Businesses costs start to rise so sellers need to put up
their prices to compensate<br><ul><li>Consumers will find it more atractive to save
more and spend less.<br></li></ul>
Impact of cost push on a business? <ul><li>High exchange rate policy makes imports
more likely - switch supplier</li><li>High interest rates = Discourage business
borrowing, consumer credit down</li></ul>
Impact of demand pull on a business? <ul><li>Demand pull = high tax = reduced
demand</li><li>Progressive tax increase = decreased demand for luxury goods =
change of product mix</li></ul>
Advantages of inflation? <ul><li>Costs passed onto consumers</li><li>Increased
value of assets / decreased debt</li></ul>
Disadvantages of inflation? <ul><li>Cash flow problems<br></li><li>Higher
interest rates</li></ul>
3 types of unemployment
<ul><li>Cyclical</li><li>Structural</li><li>Frictional</li></ul>
What is cyclical unemployment? <ul><li>Occurs in a recesion - due to fall in
demand of output</li><li>Businesses need fewer workers</li></ul>
Government policy towards cyclical unemployment? <ul><li>Control
economy </li><li>Maintain competive rate of exchange - so overseas demand
remains high</li><li>Increase tax, increase interest rates</li></ul>
What is structural unemployment? <ul><li>Certain types of workers cannot find
work even when the economy is booming</li><li>Occurs when there are structural
changes in the economy - e.g. changes in consumer taste</li></ul>
What is frictional unemployment? <ul><li>When someone loses their job - the time
taken to find a new one</li><li>People looking for particular jobs which are not
available anymore</li><li>Changing labour demands of businesses mean not as many
people are needed (capital extensive)</li></ul>
Government policy towards frictional unemployment? <ul><li>Increase job
information</li><li>Reduce unemployment benefits for those that are slow to find
work </li></ul>
What are the costs of unemployment to the country? <ul><li>Produces less goods
and services</li><li>Costs of benefits</li><li>Social problems</li></ul>
What are exchange rates? <ul><li>Price of one currency in relation to another
(Determinded by supply and demand)</li></ul>
Supply of a currency? <ul><li>Imports</li><li>Domestic population travelling
abroad</li></ul>
Who wins when a currency appreciates? <ul><li>Importers of foreign goods - raw
materials and finished goods</li><li>Likely to reduce inflation</li></ul>
Who loses when a currency appreciates? <ul><li>Exporters - companies that sell
goods and services abroad</li><li>Companies that sell goods to domestic market and
that have foreign competition</li></ul>
Who wins when a currency depreciates? <ul><li>Home based exporters - they can
increase the value of their exports</li><li>Sellers to domestic markets will face
less competition from importers </li></ul>
Who loses when a currency depreciates? <ul><li>Manufactorers that rely on
