Abdulalah Al-Jobore
Unit 1 : task 3 P5
P5 describe the inflence of two contrastnn econooic environoent on
blsiness actvites within a selected orininatonn
Econooic
The economy is comprised of a huge number of individual decisions makers who purchase and sell
goods, borrow and lend money, and raise taxes and changing interest rates. The most common
individual decision makers are included consumers, suppliers, bankers and other lender, the
government, and the Monetary Policy Commitee. These people have very important efect on the
economic environment; however there are clear patern to the type of decisions they will make. For
example , once the consumer confdence increased, most of the customers will increaser their level
of spending ,therefore the business will increaser their supply of good which could lead to make a
proft.
Ioportance of stability
Stable economic conditons usually liked by the most business people. As they can be able to make
forecasts for the short and medium term about their products’ demand in the future. The stability of
the economic will involve having the capacity to make deals secure in term of the knowledge that
the individuals you supply on credit will pay you back at the costs agreed. Similar to the money you
borrow, you will expect the repayments to be for the agreed amount.
In the UK the economic is stable which means Tesco will more likely to have a higher turnover
Therefore they will be able to make a proft and on that tme, they can be able to expand or opining
new stores in the area. Moreover, Tesco suppliers will have some benefts form the stable economic
as they are supplying Tesco with more products, and therefore they can make some forecasts about
whether they need to increase the producton rate or not.
Iopact of channes in the econooic environoent
Growth:
The period of economic growth is the opposite of a rescission. Growth exists when more goods are
being produced and consumed, and when income is increasing. The economic growth is related with
a ripple efect, this is because the consumers will increase their level of spending and will purchase
more goods. Therefore, the producers will increase the producton rate. More staf will be required
and more money will be need to invest the new machinery and equipment. The demand for frms
producing machinery and equipment will increase and therefore they will need to take on more
labour. It is also good for Tesco if the economic is more stable as this means there will be a steady
growth. This means that Tesco’s proft will increased as the consumers will increase their level of
spending, and Tesco will increaser their supply of goods.
Recession:
Recession happens when individuals associated with business turn out to be more cautous; the
customers cut back on spending and begin to save money and the supplier and seller cut back on
producing more goods and produce fewer goods. Therefore the business will try to reduce costs in
general, which may include laying of workers. The economic recession will afect Tesco’s customers
and put some pressure and money worries on them as they will only buying from the store ,they will
buy what they need instead of buying what they want. For example, instead of buying chocolate, ice
cream, and sweet, they will buy what they need which include: milk, bread and so on.
, Abdulalah Al-Jobore
Unit 1 : task 3 P5
A ripple effect:
The ripple efect is the periods where the consumers reduce their level of spending and will have
some efect on the consumer income and therefore they will not spend money to buy goods. The
economic growth and recession can cause the ripple efect, this is because when important decisions
are made, then everyone such commuter, producers and supplier will be efected and the way they
make their decisions. The best way to describe the ripple efect is a single acton having many
efects over several diferent business. For example in the year between 00 and 00,, there was
one of the biggest recession in the UK. One of the most common industries that were hit partcularly
badly were the banking, building and constructon and the high street retailing. This was afectng
the job employment, as it was hard for school leavers to fnd a job.
On these years, Tesco lost a lot of proft, as people were losing their jobs and less products on the
shelves and there were no new stock coming into the store. This because suppliers start to cut back
on their orders, therefore Tesco customers base decreased and this has a massive efect on Tesco.
Level of infaton
The infaton in the economy means there is a general rise in the price of goods and services.it does
not means there will be rise in every price, however there will be raising on average prices. In the
UK, there is a way to measure the average prices which is measure by the government using a
measure known as The Consumer Price Index (CPI).The infaton can damage the business as it
creates sort of uncertainty . Rising the rate of infaton might result in the increase of the costs they
have to pay: the staf will require more wages; materials’ might increase as well as the costs of the
fuel and energy. Therefore, the business will have to choice whether they leave the prices constant
and see the proft fall or raising the prices and may lose to their compettors.
Currently the rate of infaton in the UK is 0.3%, which measure by the government. This suggests the
product we purchase stll high which means it did not increase much. Recently, there was a 5%
increase in the price of alcohol. This means the demand on alcohol will decreased as the prices go
up, however this will bring more revenue for the government. This will afect the Tesco, as there is
less customers who will purchase alcohol in the store that also means lower income will come into
the business.
Availability and cost of credit
The cost of credit is the rate of interest. When business borrow money for example £ ,000 for one
year at 5% interest rate then it will have to pay back £ 100, this £100 is the fve percent of the
£ ,000. Monetary Policy Commitee (MPC) is an independent body that comprised of men and
women that have a good understand of the economy, which will set the interest rate.
For Tesco, when the economy is stable , they will be able to borrow money from banks if they are
deciding to expand and open more store into new country. Tesco usually borrow money when the
interest rate is lower. Recently, the interest of rate was low at all the tme. This has a good beneft
for Tesco as they money they have to repay it back to banks would be small amount. Currently the
rate interest set by the government is 0.5%, which shows that borrowing money is very cheap at this
tme. Therefore, Tesco can borrow money if they want to expand at the future, as they can aford
their repayments of the borrowed money.
Unit 1 : task 3 P5
P5 describe the inflence of two contrastnn econooic environoent on
blsiness actvites within a selected orininatonn
Econooic
The economy is comprised of a huge number of individual decisions makers who purchase and sell
goods, borrow and lend money, and raise taxes and changing interest rates. The most common
individual decision makers are included consumers, suppliers, bankers and other lender, the
government, and the Monetary Policy Commitee. These people have very important efect on the
economic environment; however there are clear patern to the type of decisions they will make. For
example , once the consumer confdence increased, most of the customers will increaser their level
of spending ,therefore the business will increaser their supply of good which could lead to make a
proft.
Ioportance of stability
Stable economic conditons usually liked by the most business people. As they can be able to make
forecasts for the short and medium term about their products’ demand in the future. The stability of
the economic will involve having the capacity to make deals secure in term of the knowledge that
the individuals you supply on credit will pay you back at the costs agreed. Similar to the money you
borrow, you will expect the repayments to be for the agreed amount.
In the UK the economic is stable which means Tesco will more likely to have a higher turnover
Therefore they will be able to make a proft and on that tme, they can be able to expand or opining
new stores in the area. Moreover, Tesco suppliers will have some benefts form the stable economic
as they are supplying Tesco with more products, and therefore they can make some forecasts about
whether they need to increase the producton rate or not.
Iopact of channes in the econooic environoent
Growth:
The period of economic growth is the opposite of a rescission. Growth exists when more goods are
being produced and consumed, and when income is increasing. The economic growth is related with
a ripple efect, this is because the consumers will increase their level of spending and will purchase
more goods. Therefore, the producers will increase the producton rate. More staf will be required
and more money will be need to invest the new machinery and equipment. The demand for frms
producing machinery and equipment will increase and therefore they will need to take on more
labour. It is also good for Tesco if the economic is more stable as this means there will be a steady
growth. This means that Tesco’s proft will increased as the consumers will increase their level of
spending, and Tesco will increaser their supply of goods.
Recession:
Recession happens when individuals associated with business turn out to be more cautous; the
customers cut back on spending and begin to save money and the supplier and seller cut back on
producing more goods and produce fewer goods. Therefore the business will try to reduce costs in
general, which may include laying of workers. The economic recession will afect Tesco’s customers
and put some pressure and money worries on them as they will only buying from the store ,they will
buy what they need instead of buying what they want. For example, instead of buying chocolate, ice
cream, and sweet, they will buy what they need which include: milk, bread and so on.
, Abdulalah Al-Jobore
Unit 1 : task 3 P5
A ripple effect:
The ripple efect is the periods where the consumers reduce their level of spending and will have
some efect on the consumer income and therefore they will not spend money to buy goods. The
economic growth and recession can cause the ripple efect, this is because when important decisions
are made, then everyone such commuter, producers and supplier will be efected and the way they
make their decisions. The best way to describe the ripple efect is a single acton having many
efects over several diferent business. For example in the year between 00 and 00,, there was
one of the biggest recession in the UK. One of the most common industries that were hit partcularly
badly were the banking, building and constructon and the high street retailing. This was afectng
the job employment, as it was hard for school leavers to fnd a job.
On these years, Tesco lost a lot of proft, as people were losing their jobs and less products on the
shelves and there were no new stock coming into the store. This because suppliers start to cut back
on their orders, therefore Tesco customers base decreased and this has a massive efect on Tesco.
Level of infaton
The infaton in the economy means there is a general rise in the price of goods and services.it does
not means there will be rise in every price, however there will be raising on average prices. In the
UK, there is a way to measure the average prices which is measure by the government using a
measure known as The Consumer Price Index (CPI).The infaton can damage the business as it
creates sort of uncertainty . Rising the rate of infaton might result in the increase of the costs they
have to pay: the staf will require more wages; materials’ might increase as well as the costs of the
fuel and energy. Therefore, the business will have to choice whether they leave the prices constant
and see the proft fall or raising the prices and may lose to their compettors.
Currently the rate of infaton in the UK is 0.3%, which measure by the government. This suggests the
product we purchase stll high which means it did not increase much. Recently, there was a 5%
increase in the price of alcohol. This means the demand on alcohol will decreased as the prices go
up, however this will bring more revenue for the government. This will afect the Tesco, as there is
less customers who will purchase alcohol in the store that also means lower income will come into
the business.
Availability and cost of credit
The cost of credit is the rate of interest. When business borrow money for example £ ,000 for one
year at 5% interest rate then it will have to pay back £ 100, this £100 is the fve percent of the
£ ,000. Monetary Policy Commitee (MPC) is an independent body that comprised of men and
women that have a good understand of the economy, which will set the interest rate.
For Tesco, when the economy is stable , they will be able to borrow money from banks if they are
deciding to expand and open more store into new country. Tesco usually borrow money when the
interest rate is lower. Recently, the interest of rate was low at all the tme. This has a good beneft
for Tesco as they money they have to repay it back to banks would be small amount. Currently the
rate interest set by the government is 0.5%, which shows that borrowing money is very cheap at this
tme. Therefore, Tesco can borrow money if they want to expand at the future, as they can aford
their repayments of the borrowed money.
