external influences

  • Created by: afiii
  • Created on: 16-04-19 07:44
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  • External influences on business activity
    • GDP
      • total value of goods and services produced in a counrty
      • increase in GDP
        • increases employment
          • increases consumer incomes
            • rising demands for business's profucts
              • dependent on how income elastic demand is
                • e.g  luxury goods have an income elasticity of >+1
                  • income rises - demand rises
                • inferiror goods have a negative income elasticity
                  • income rises- demand falls
    • Inflation
      • price rise due to cost rising ( cost-push) or demand rising (demand-pull)
      • high inflation
        • anti-inflationary measures ; increase in interest rates
          • disadvantag-eous for high geared companies
        • job security
          • uncertaintiy about real income value
            • demand high wage
              • industrial disputes
                • disrupts productions
                  • increase costs
      • low inflation
        • implement a price increase
          • fixed assets value increase
            • value of business increases
              • financial security
    • Exchange rates
      • appreciation
        • rise in external value of the currency
        • -
          • exports dearerer
            • fall in demand
          • imports cheap
            • reduction in competition
              • consumers switch to imports
        • +
          • imports  cheap
            • increase competiveness
            • reduce rate of inflation due to  decrease in prices of imported goods
      • depreciation
        • -
          • rising costs
            • increasing price
              • Inflation
                • price rise due to cost rising ( cost-push) or demand rising (demand-pull)
                • high inflation
                  • anti-inflationary measures ; increase in interest rates
                    • disadvantag-eous for high geared companies
                  • job security
                    • uncertaintiy about real income value
                      • demand high wage
                        • industrial disputes
                          • disrupts productions
                            • increase costs
                • low inflation
                  • implement a price increase
                    • fixed assets value increase
                      • value of business increases
                        • financial security
        • +
          • less price competition from importeters

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