2.5 External influences

Define inflation

The general rise in prices in an economy over time

Define the Consumer Price Index (CPI)

measuring monthly changes in prices of a range of good and services comparing these to easy period

Define the exchange rate

The value of one currency expressed in terms of another

Define appreciation

An increase in the value of the pound against other countries

Define depreciation

A decrease in the value of the pound against other countries

Define interest rate

The percentage reward offered for saving money and charged for borrowing money

Define direct taxes

Taxes levied on income (i.e. corporation tax)

Define indirect taxes

Taxes levied on spending (i.e. VAT)

Define a recession

When economies experience two consecutive quarters or more of negative economic growth

Define a boom

A period of time where an economy experiences increasing rate of economic growth

Define economic uncertainty

When it is difficult to forecast the supply and demand in an economy

Define legislation

Laws and regulations passed by governments that require businesses and individuals to conduct their behaviour in a particular manner

Define consumer protection legislations

Aims to ensure consumers are treated fairly by companies they interact with

Define employee protection legislations

Aims to prevent exploitation of workers

Define environmental legislation

Aims to hold businesses responsible for their environmental impact

Define competition legislations

Aims to protect interest of consumers and businesses by restricting anticompetitive practices

Define health and safety legislation

Requiring a business to operate in a way that protects physical and mental wellbeing of its employees, contractors and customers

Define the competitive environment

Concerns to the degree to which a business is affected by rivals that operate in the same market

Define market size

Number of customers and sellers in a particular market