Business Studies Collins Revision Guide. - StudyGuide.PK

EXTERNAL ENVIRONMENT (4)Economic influences●●●●Changes in government policy can affect businesses. Fiscal policiesare those that affect the way the government spends money andraises money through taxes. For example, the government canchange the amount of money it spends on pensions, which will begood for businesses that make things that pensioners buy.Increasing taxes may affect the type of products that people buy. Forexample, high income tax might reduce the demand for luxury goods.Monetary policy is a way that the government tries to control thecost of borrowing money. Businesses are affected by monetary policybecause it affects how much interest they have to pay on any moneythat they borrow. If interest rates are high then the business has topay a lot of interest on any loans it has and so it may not be able toafford to borrow any more to expand or launch new products.If interest rates go down then consumers may be more likely toborrow money to buy luxury items like new cars.Environmental influences●Consumers have become more environmentally aware and this hasled to businesses having to consider the environmental affects oftheir actions. Some of these effects are legislated against, forexample pollution, and others are used by businesses for marketingpurposes. Businesses will claim that their products are ‘ozonefriendly’ or are packaged using recycled materials. Some of theseactions will increase the costs to business; others will reduce costsand increase sales.The symbol for recycled cardboard88