External Influences on Business Activity

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What is the definition of a monopoly to the government?
A business which has more than a 25% market share
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What is the definition of a monopoly to most people?
A business with a very dominant position in the market
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What is a competitive market?
There is a large number of producers selling to a large number of consumers
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Why does the government promote competitive markets, rather than monopolies?
They believe that the benefits to consumers of competitive markets are more important than the benefits to producers of monopoly markets
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How does the British government promote competition between businesses?
Has organisations that monitor the amount of competition between businesses, e.g. Competition Commission
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What is an advantage of a competitive market to consumers?
Firms compete to make the highest quality products/Usually gives consumers a good price for a product
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What is an advantage of a monopoly market to producers?
Can charge higher prices as the consumer has less choice about who to buy from
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How do businesses affect the environment?
They use raw materials (many of which are non-renewable)/Cause more traffic on roads/Cause pollution that can harm wildlife, be an eyesore and be difficult or expensive to clean up
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Why are businesses deciding to become more environmentally friendly?
People are more aware of the impact of environmental issues
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How are businesses becoming more eco-friendly?
Using more renewable energy sources/Recycling more materials/Sourcing sustainable materials
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What is a disadvantage for a business when deciding to become more eco-friendly?
Green production is more expensive and costs a lot to clean up pollution
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What is an advantage for a business when deciding to become more eco-friendly?
Can attract new customers and increase sales
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What is an advantage for a business using labour from LEDCs?
Be able to sell products at a lower price - might give the business competitive advantage/Using fair trade workers is more expensive, meaning the product would have to be sold at a higher price, so the business might lose sales
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What is an disadvantage for a business using labour from LEDCs?
An ethical business may gain new customers and increase its profits
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What is globalisation?
The world being seen as one big market place, increasing the production of goods and exchange of cultures
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Who must pay corporation tax?
Private limited companies on their profit
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Who pays income tax?
Employees pay between 20-45% from their wages
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What is National Insurance?
Tax paid by both employer and employee so they can qualify for State Pension
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How does a business benefit from public spending?
Spending money on roads and public services benefit businesses and can help to reduce running costs
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How does an increase in population benefit businesses?
Means more demand for products/Bigger selection of potential workers/Increase in demand for specific products, e.g. Halal meat
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How does a decrease in population affect businesses?
Less demand and a smaller workforce
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What is the role of the Bank of England in relation to inflation?
It sets a base rate of interest (currently at 2%) to control the rate of inflation
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How does low interest rates benefit businesses?
Can pay less on loans and mortgages or may choose to pay these off while interest is low/Consumers have more disposable income
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What is a disadvantage of high interest rates for a business?
Consumers have less disposable income so the company may see a decline in profit
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How does large rates of unemployment cause problems for businesses?
Lack of demand for products/Unemployed workers may lose skills so businesses need to retrain them
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How can some companies benefit from high rates of unemployment?
Lots of people to recruit from and may be able to pay lower wages
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What is a benefit of international trade?
Increased choice and lower prices for consumers/Economies can specialise at what they're best at/Efficient firms can gain economies of scale
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What is a problem with international trade?
The economy can become too dependent on imports and it can be difficult for firms in one country to develop when a firm in a different country is producing cheaper exports
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How do UK businesses benefit from the EU?
40% of the UK's international trade is done with EU countries/Reduces compliance costs/Using cheap imports from the EU helps UK companies compete internationally
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How can the EU be bad for UK businesses?
The UK currently imports more goods from EU countries than exports - some of these imports could be made in the UK
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Other cards in this set

Card 2

Front

What is the definition of a monopoly to most people?

Back

A business with a very dominant position in the market

Card 3

Front

What is a competitive market?

Back

Preview of the front of card 3

Card 4

Front

Why does the government promote competitive markets, rather than monopolies?

Back

Preview of the front of card 4

Card 5

Front

How does the British government promote competition between businesses?

Back

Preview of the front of card 5
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