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#Post#: 9--------------------------------------------------
Business Studies - mixed work
DIR By: Dietrech
Date: October 3, 2013, 9:27 am
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[font=comic sans ms]Factors affecting the impart of change in
price:
-Proportion of total cost.
-How large the change of price is.
-Can the business pass on the increase.
What are interest rates?
-The rate of interest is effectively "The price of borrowing
money."
-How can money have a price?
>To work this out, ask yourself the following question:
--- Quote ---
> If a friend wants to borrow £100 for 1 year, how much would
you want back from them at the end of the year?
--- End Quote ---
[font=comic sans ms][size=12pt]Why do people spend less when
interest rates increase?
-If the Bank of England puts interest rates up then a typical
person will either:
>Have to pay back more on their mortgage ---> So they will have
less money left to spend on shops.
>Borrow less money since it now costs more ---> So reduce their
spending in the shops.
-A decrease in interest rates would have the opposite effect.
The effects of interest rates on businesses:
-If interest rates increase then a business may:
>Reduce or cancel planned investment, i.e. the purchase of new
machinery.
>Reduce borrowing, which may mean cutting costs i.e. labour.
>Reduce production, since they expect to sell less if consumers
have less money.
-Of course a decrease in interest rates may have the opposite
effect.
Who controls interest rates?
-Traditionally the Government controlled the rate of interest.
-However it is now set by the Bank of England.
-This means that they can increase or decrease their interest
rates and the whole economy will depend on the interest they
set.
Calculating the cost of foreign exchange:
Two important techniques to learn are SPICED and LPIDEC.
Strong
Pound
Imports
Cheaper
Exports
Dearer
Lower
Pound
Imports
Dearer
Exports
Cheaper
The exchange rate is the price of one currency in the terms of
another currency. Example: £1 = $1.50
The most commonly quoted rates are:
£/$ (Pound sterling against US Dollar)
$/¥ (US Dollar against Japanese Yen)
£/€ (Pound Sterling against Euro)
€/¥ (Euro against Japanese Yen)
What determines exchange rates?
-Since money is a commodity, a currency's value will depend
upon:
>The number of people who want to buy it (DEMAND)
>The number of people who want to sell it (SUPPLY)
-Changes in the exchange rate can have very big effects upon
businesses:
A car made in the UK, price = £20,000
A car made in the USA, price = $30,000
New exchange rate:
£1=$2
British car sold in the USA for:
$40,000 (£20,000 x 2)
American car sold in the UK for:
£15,000 ($30,000 ÷ 2)
Original exchange rate:
£1=$1.50
British car sold in the USA for:
$30,000 (£20,000 x 1.5)
American car sold in the UK for:
£20,000 ($30,000 ÷ 1.5)
-The effect upon a business depends upon whether the business
buys and sells abroad.
-In general:
[font=comic sans ms]
[table]
[tr]
[td] Increase in value of
(£) Decrease in value of (£)
Effect on imports Becomes cheaper
Becomes more expensive
out of the UK so will increase
so will fall
Effect on exports Becomes more expensive Becomes
cheaper so
out of the UK so will fall
will increase
[/td][/tr][/table]
[font=comic sans ms]Recession:
-Economy collapses
-Fall in sales
-Drop in the economic growth
-Closure in businesses
-Loss of jobs
What happens in a boom?
-Businesses produce more goods.
-Businesses invest in more machinery.
-Consumers spend more money. There is a 'feel good' factor.
-Less money is spent by the Government on unemployed benefits.
-More money is collected by the Government in income tax and
VAT.
-Prices tend to increase due to extra demand.
What happens in a recession?
-Businesses cut back on production.
-Some businesses may go bankrupt.
-Consumers spend less money. Fall in 'feel good' factor.
-Individuals may loose their jobs.
-More money is spent by the Government in income tax and VAT.
-Prices tend to fall, due to less demand.
The effect of the business cycle on firms
-many businesses are affected by the business cycle
[table]
[tr]
[td]Products significantly affected by the cycle Products
unaffected by the cycle
-Wine
-Coal
-Sports and leisure good -Bread
-Restaurant meals
-Petrol
-Jewellery
-Cigarettes
-Household furniture -Fresh
vegetables[/td]
[/tr]
[/table]
(Will be updated soon! Keep tuned.)
#Post#: 75--------------------------------------------------
Re: Business Studies - mixed work
DIR By: Taranut
Date: January 5, 2018, 9:08 pm
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Thank you very much for the advice. It was very helpful to me.
It helped me a lot.
#Post#: 81--------------------------------------------------
Re: Business Studies - mixed work
DIR By: Yodasaki
Date: April 20, 2018, 1:52 am
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Your information is very good that I want.
#Post#: 97--------------------------------------------------
Re: Business Studies - mixed work
DIR By: paovaree
Date: November 8, 2018, 3:04 am
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I agree with this opinion.
#Post#: 159--------------------------------------------------
Re: Business Studies - mixed work
DIR By: blackst
Date: May 5, 2020, 4:20 am
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Interesting topics are useful, and this information can be
edited
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