6.2 the economic climate

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  • Created on: 27-12-20 18:06
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  • 6.2
    • the economic climate: refers to how well the country is doing in terms of levels of employment and income
      • consumer income levels: level of income received by people is important as it influences how much money people have to spend on goods and services.
      • employment levels: this influences income, some people would earn more if they are employed in comparison to someone who is unemployed and receives welfare benefits.
      • these two are linked and generally when employment increases so does income and this has an affects on businesses' sales, profits, production and strategy
    • possible impacts on businesses of rising income and employment.
      • sales of luxury goods will increase more than sales of necessities as these are more affordable for people.
      • increase in sales as consumers have more money to spend, so production and profits may rise
      • business that produce cheaper goods and services may experience a fall in sales as people switch to better more expensive goods.
      • evaluation points: -the impact of economic changes on business will depend on what kind of goods it sells.-the bigger the change in income, the greater the impact on business -falling income and employment will have the opposite effects.
    • possible changes in business strategy when income and employment fall:
      • production: the business may try to reduce costs by reducing waste, improving worker productivity
      • human resources: may try to reduce costs by: improving worker productivity, laying off off workers to reduce workers bill
      • finance: they might try to reduce costs by: taking out cheaper loans, reducing its overdraft
      • marketing: may try to increase sales by: increasing advertising, producing a cheaper product, lowering prices.


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