Changes in the economic climate

• What is the general level of wealth, consumption, and activity within a region called?

  Economic climate
• How do businesses need to respond to changes in the economic climate?

  By adapting to changes in consumer spending
• What are the potential responses of businesses to a decrease in consumer spending?

  Adjusting prices or changing products
• What happens to consumer spending when people have more money available?

  It usually increases
• What is an example of a product change due to economic factors?

  Chocolate bars reducing in size
• What is the unemployment rate?

  Being without a job or source of income
• How do higher unemployment rates affect consumer behavior?

  Consumers may spend less
• What do businesses typically do when the unemployment rate is high?

  Lower prices to encourage purchases
• What happens to consumer spending when interest rates increase?

  Consumers may spend less
• What is 'shrinkflation' in business terms?

  Reducing product sizes while keeping prices
• How do decreased interest rates affect consumer spending?

  Consumers may spend more
• What might businesses do when interest rates decrease?

  Launch bigger product versions for higher prices
• What happens to consumer behavior when the value of the pound sterling increases?

  Consumers may spend more on imports
• How do businesses respond to an increased value of the pound sterling?

  Target new domestic markets
• What is the effect of a decreased value of the pound sterling on consumer spending?

  Consumers may spend less on imports
• How do businesses react to a decreased value of the pound sterling?

  Target new international markets
• What are the typical responses of consumers and businesses to changes in the economic climate?

  • Higher unemployment rate:
  • Consumers: Spend less
  • Businesses: Lower prices
  • Lower unemployment rate:
  • Consumers: Spend more
  • Businesses: Increase prices
  • Increased interest rates:
  • Consumers: Spend less
  • Businesses: Reduce product sizes
  • Decreased interest rates:
  • Consumers: Spend more
  • Businesses: Launch bigger products
  • Increased value of pound sterling:
  • Consumers: Spend more on imports
  • Businesses: Target domestic markets
  • Decreased value of pound sterling:
  • Consumers: Spend less on imports
  • Businesses: Target international markets