Economic Growth Essay

Submitted By RThomas17
Words: 837
Pages: 4

Describe the influence of two contrasting economic environments on business activities within a selected organisation (P5)

Economic growth
Economic growth is a long-term expansion of a country’s productive potential, growth is the way the country’s economy increases over a course of time.
Recession
A significant decline in activity across the economy, lasting longer than a few months. This can result in people losing jobs and the only spend the amount of money they can afford. Recession will affect businesses as not many people will be able to afford their products. This is mostly because they do not have the money to buy the goods which then means businesses have to reduce their prices.
Inflation
The effect of inflation is the increase of prices for goods and services within an economy. Inflation is cause by an increase in the economy this is where the value of money decreases and prices go up. This will affect businesses as they are able to raise their prices as people have more money to spend on buying goods/products.
Government policy e.g. VAT, corporation tax
Government policy is the money a business has to pay the government for selling their goods or the services that were sold. (VAT and Corporation tax) VAT is the value that is added after the purchase of a good while Corporation Tax is the value that the business has to pay the government. This affects businesses as the government will take more money basing on the more they sell.
Demand
This is what the customer wants/demands, so for example when the economy is growing the demand will increase as people have money to spend however when the economy is falling (recession) then the demand will decrease as people have less money.

Supply
This is the supply of products from an external party; they would give products to a business in exchange for money. If this was to decrease it would mean that they would have fewer products and in turn make less money.
The effect Inflation has on Marks and Spencer’s:
Marks and Spencer’s will benefit from the growth of inflation because their customers will not change as they are able to afford the products that are sold by M&S, this means that the profit may increase as they are able to raise the prices as people have more money to spend in M&S, also their profit would increase because the public will still shop at M&S which means that they will be positively affected by low inflation. Furthermore prices are cheap and more affordable for customers therefore the business can sell their products at a lower price in order to attract the customers but still make the business profitable. This shows that the growth of inflation will cause the public to have more money therefore they’re able to spend more which leads to more profit for the business.
The effect demand has on Marks and Spencer’s:
Marks and Spencer’s will benefit from the growth of demand because they will make more money as people are demanding more so they are willing to pay more for these things that they are demanding, M&S can also charge a higher rate for…