Causes of Uncertainity

Economics Unit 2b topic 5


Causes of Uncertainity

Causes of Uncertainity

  • Shocks
  • Commodity price fluctuations e.g. food
  • Competitor actions
  • Exchange rates
  • Government policy

 1. Shocks

  • 9-11, 7-7 are perfect examples but many shocks affect business that are not so large scale
  • E.g. – what would happen if Southend Pier was to burn down today?  Who would win and lose?
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2. Commodity Prices

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3. Competitors Actions

  • How has Easyjet and Ryanair affected the likes of BA?
  • How Would a sudden price decrease from Coca-Cola affect Pepsi?
  • Often such a change can come as a surprise!
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4. Exchange Rates

  • Look at the table below - what is it showing?

          (22/11/10 - who would bewinner is suddenly changed to

  • 1.00 GBP = 2.00 USD???

 Currency Converter GBP/USD

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5. Government Policy

  • The new coalition government scrapped Building Schools for the Future (BSF) - winners and losers??

                                               Expect The Unexpected

  • With so much uncertainty and uncontrolled variables - businesses MUST be ready to cope with change!!

                                                Uncertainty and Risk

  • Uncertainty Brings a variety of risks
  • Businesses do not like risks especially lenders such as banks who are percieved to be risk averse
  • Poor risk taking decisions in financial markets by lenders lead to the recent crisis and subsequent credit crunch
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