THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE
CHANGING BUSINESS ENVIRONMENT
Government influence
Aims of government:
to protect individuals and groups
to provide essential industries and services
to help the economy run smoothly and to protect employment
Government economic objectives:
Low inflation- inflation is the increase in the average price level of goods
and services over time.
low levels of unemployment- in unemployment total level of output is
lowered and government has to spend a lot of money
economic growth- when the country’s gross domestic product increases;
more goods and services are produced
growth-unemployment falls, higher living standards
boom- prices rise and shortage of workers
recession- falling demands and profit
slump- long-drawn-recession, high unemployment
balance of payments- records the difference between a country’s exports
and imports
exchange rate: the price of one currency in terms of another
Government economic policies: governments have a lot of economic power
Fiscal policy- any change by the government in the tax rates or public
sector spending
Taxes
o Income tax- on peoples incomes, it mostly is progressive
o Profits or corporation tax- on profits of business
o Indirect taxes- added to prices of goods and taxpayers pay as
they purchase goods
o Import tariffs and quotas- import tariff is a tax on an imported
product; import quota is a physical limit to the quantity of a product
that can be imported
Monetary policy and interest rate- monetary policy is a change in interest
rates by government or central bank; interest rate is the cost of borrowing
money
Supply side polices- used by governments to improve the efficient supply
of goods and services in their country
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Paula Hohne-Tarragona
THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE
Government help in businesses: government can encourage businesses
Regional assistance- problems can emerge from having rich areas and
poor areas in one country. Governments try to spread development by
leading firms to poorer areas
Small firms- governments help small businesses because they help the
overall economy
Exporting of goods and services- government support exporters by
encouraging banks to lend them lower interest rates, offering subsides or
tax reductions, and by trying to keep the exchange rate as stable as
possible
Technology
Technological changes:
Advantages
New products encourage to buy more often
First producers of new idea have huge competitive advantage
New high tech production methods increase productivity and
lower average costs
Fewer workers are required- fewer to recruit and manage
New methods can be adapted quickly- gives firm flexibility to
meet consumers needs
Disadvantages
Expensive to research and develop new ideas and products
Non developing firms lose sales and market share
New production methods are expensive
Workers need retraining or lose their jobs- fear of this may lead
to fall in motivation
Introducing- some people are afraid of changes in production methods
Firms try to involve workers in changes rather than just letting them deal
with it.
People are probably more positive about this if they are told why they are
needed and how they will be trained to use them.
Workers may be encouraged to make suggestions to make work more
efficient.
Positive effects need to be made clear to workers.
E-commerce: buying and selling over the internet
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Paula Hohne-Tarragona
THE FROG’S EQUATION: BUSINESS STUDIES FOR IGCSE
Market changes
Consumer spending patterns: the typical products bought by consumers.
These are heavily dependent on income, but also affected by lifestyle.
Competitive markets: markets have become more competitive
shrinking globe - easier to transfer products and services around
access to overseas markets - reduced taxes and barriers
low cost of setting up business
privatisation of industries
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Paula Hohne-Tarragona
