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Unit 5.2: Risk or Certainty?

Learning outcomes for this unit:
  1. Understand different ways that businesses can measure success
  2. Know the factors which can lead to business failure
  3. Be able to explain the importance of cash-flow in determining success / failure of a business
  4. Be able to explain how changing levels of demand in the economy can affect a business
  5. Be able to explain the causes and effects of inflation
  6. Be able to identify and explain how unemployment has costs for individuals and the economy /
      society
  7. Understand the impact that internal and external shocks can have on the economy
  8. Be able to explain the impact of exchange rates on imports, exports, businesses and individuals
  9. Know how interest rates are used to influence economic activity
  10. Know the main ways that government spending and taxation affect the economy and social
      issues
  11. Be able to make judgements about how effective government actions may be in tackling social
      problems


What you should know....
  1. That competitive advantage exists when a firm appeals to customers more than a rival
  2. Profit is an important measure of success, but profit margin is a better measure
  3. Social success is measured by a business’s performance against ethical, environmental and social
      factors
  4. Business failure can be caused by a change in demand
  5. Demand can fall for many reasons including changes in income, fashions and competition
  6. Getting the marketing mix wrong can lead to business failure
  7. Cash flow involved flows of money into and out of a business
  8. Cash flow and profit are not the same thing
  9. Productivity measures the amount of output per worker or machine per period of time
  10. Rising productivity means lower average costs
  11. Economic activity is the amount of buying and selling that takes place in an economy
  12. Greater spending in an economy can lead to higher inflation
  13. Inflation is associated with higher average prices in an economy and can be controlled by the use of
      interest rates
  14. The difference between imports and exports
  15. Than an exchange rate is the value of one currency in terms of another
  16. How different businesses are affected by exchange rates
  17. What ‘the interest rate’ is and how it affects economic activity
  18. Methods by which the government can affect the economy
  19. Examples of what the government can do to try to solve social problems
Revision checklist
     Key terms        Definition

      Profits



   Market share



  Competitiveness



    Competitive
     advantage



   Social success



   Marketing mix



     Cash flow



    Productivity



   Average cost



Consumer confidence



     Inflation



   Cost of living



   External shock



   Internal shock
  Tax revenue



     Export



     Import



 Exchange rate



  Interest rate



Economic activity



Monetary policy



  Fiscal policy



    Demand
Make sure you know:
4 ways to measure       1.
business success:
                        2.

                        3.

                        4.

4 factors that could    1.
cause a business to
lose competitiveness:   2.

                        3.

                        4.

How poor cash flow
could lead to
insolvency:


The causes and          Causes:
effects of inflation:


                        Effects:




4 costs of              1.
unemployment to the
individual:             2.

                        3.

                        4.

4 costs of              1.
unemployment to
society / the wider     2.
economy:
                        3.

                        4.

Examples of internal    Internal:
and external shocks,    e.g. changes in the housing market
and how these would
affect the economy:
                        External:
                        e.g. global commodity prices
The impact of a        Strengthening:
strengthening /
weakening pound:

    Think SPICED
                       Weakening:




How interest rates     If interest rates are high, this means that the desire to spend on credit is ________
impact on inflation:
                       ___________________________________________________________________

                       because ____________________________________________________________

                       ___________________________________________________________________

                       ...and the desire to save is _____________________________________________

                       ___________________________________________________________________

                       because ____________________________________________________________

                       ____________________________________________________________________

                       ...so the amount of money in the economy is likely to ________________________

                       which means that inflation should be _____________________________________


How changes in         Economy:
taxation impact on     Increased taxes
the economy and
social issues:


                       Decreased taxes




                       Social issues (e.g. health, education, crime, poverty):
                       Increased taxes




                       Decreased taxes
How changes in           Economy:
government spending      Increased government spending
impact on the
economy and social
issues:

                         Decreased government spending




                         Social issues (e.g. health, education, crime, poverty):
                         Increased government spending




                         Decreased government spending




3 social problems that   1.
the government is
trying to address        2.
using tax revenue:
                         3.