discuss….. Thought for the day:

External costs and benefits Appreciate the concepts of social costs and benefits Understand the difference between a social cost and social benefit and a financial cost and a financial benefit Show an understanding of how business activity can create them Use examples to show how business decisions create social costs and benefits Apply such concepts to a given business decision Evaluate the possible consequences to stakeholders of a given business decision Exchange rates Understand how importing/exporting decisions might be affected by changes in exchange rates Understand the concept of a rate of exchange of a currency Understand what is meant by an appreciation and depreciation of a currency Show awareness of the importance of exchange rate changes to importing and exporting businesses Business cycle The main phases of the cycle Describe the main stages of a business cycle Impact of boom/recession on business Understand the impact of the stages on a business in terms of sales, profits and business costs

How to get an A Knowledge & Understanding Anayslis Evaluation A Grade Application facts, terms, concepts and conventions appropriate to the syllabus; theories and techniques Apply facts, terms, concepts, theories and techniques to business problems and issues. Link to a business. Examine, Analyse, Interpret, Formulate, Cause and Affect, advantages & disadvantages. Evaluate, discuss, justify, advise, recommend. reasoned explanations, develop arguments, understand implications and draw inferences A04 A03 A02 A01

Soft copies of the four topics… students download and turn into an essay

External costs and benefits Appreciate the concepts of social costs and benefits Understand the difference between a social cost and social benefit and a financial cost and a financial benefit Show an understanding of how business activity can create them Use examples to show how business decisions create social costs and benefits Apply such concepts to a given business decision Evaluate the possible consequences to stakeholders of a given business decision Pg 238

Externalities Social costs & benefits: costs and benefits to society as a whole rather than to the business.

Externalities External costs (externalities): the social costs & benefits of business activity borne by the wider community E.g Lorry delivering goods – creates noise – neighbours suffering don’t get compensation. Air pollution – causes illness Greenhouse gasses – lead to global warming, causing storms and flooding No compensation.

Externalities Costs and benefits which the business doesn’t pay or receive. E.g building a beautiful office block People enjoy looking at it. An enjoyment the business receives no money for. Other examples: Spill over of technology (e.g Velcro)

Externalities Noise pollution, air pollution, global warming – Negative externalities The beautiful building – Positive externalities.

Externalities Business are under pressure to pay for the social cost of anything they do. Environmental groups – campaign against larger business who pollute. Residence protest against local factories that harm their environment These protests equal bad publicity and lower sales.

Dealing with external costs Internalisation: Supplier accepts responsibility & absorbses the cost of putting it right. Pressure groups: demand the government & private firms take externalities into account when contemplating a major project (pressure groups don’t always win!) Read about itRead about it!

Dealing with external costs Private action by firms or individuals want a good public image so will pay for social cost e.g football club pays for policing during match time. Government Action – tax & Subsidies, pricing systems (eg pay for parking), controls & licensing

Pressure Groups Non-Profit organisations established by their members to address a special interest of the group. - campaigning against environmental neglect Smoking in public areas Testing on animals. E.g Trade Unions, animal rights activist groups, environmental protection. Pg 238 Examples

Pressure Groups Aim to win public support from their actions. Try to influence government legislation (national minimum wage) Advantage – they force business and government to take into account the true costs of business activity (pollution & environmental damage) Green peace in Poland Pg 238

Exchange rates Understand how importing/exporting decisions might be affected by changes in exchange rates Understand the concept of a rate of exchange of a currency Understand what is meant by an appreciation and depreciation of a currency Show awareness of the importance of exchange rate changes to importing and exporting businesses

The exchange rate measures the value of one currency in terms of foreign currencies. Appreciation of currency means higher exchange rates, means that export prices will be high therefore the exporter will have less price competiveness. Depreciation of the currency means lower exchange rate means the domestic firms that import raw materials and components will suffer from having to pay relatively higher prices. Large unpredictable changes in the exchange rate can make business planning difficult because a business cannot predict its export earnings or costs of imported materials. - explained (6 mins)explained

Exchange Rates Australia dollar strong AUSD$1 = SING$2 So if Australia wants to sell for AUD$20 (to make $10 profit) will have to sell for… SING$40 If AUD keeps getting more expensive then will have to increase selling price (to maintain profit margin) Australian dollar weak AUSD$2 = SING$1 So if Australia wants to sell for AUD$20 (to make $10 profit) will have to sell for… SING$10 If AUD keeps getting weaker.. Can be cheaper..

Business cycle To learn: The main phases of the cycle Describe the main stages of a business cycle Impact of boom/recession on business Understand the impact of the stages on a business in terms of sales, profits and business costs

The Business (Economic) Cycle

The Business Cycle Typical business cycle – Peak – Recession – Trough – Recovery

Downturn: Demand falls Output falls Employment falls Falling in investment Many business making losses Some business close down.

Recovery: Stock levels begin to fall Output increases Employment rises.

Boom: Full capacity in the economy Prices increase Investment increases Business working flat out Shortage of skilled labour (wages rise).

p Pg 240

1.What did I learn this lesson that I didn’t know before?

Plenary Level achieved_____ What do you now know as a result of today’s lesson? What are your areas for improvement? What are you going to do about this?