Economic climate

• The economy is made up of millions of individual consumers, many thousands of businesses and governments
• The economic climate describes the state of key factors within a country such as the level of goods and services produced and the number of jobs available.
• An improving economic climate

  • Rising levels of employment
  • Rising levels of spending
  • Rising consumer incomes
  • Rising levels of production
• A weakening economic climate

  • Falling levels of employment
  • Falling levels of spending
  • Falling consumer incomes
  • Falling levels of production
• Interest is the cost of borrowing and the reward for saving.
• High interest rates

  • Large repayment
  • Less borrowing
  • More saving
  • Weakening economic climate
• Low interest rates

  • Small repayment
  • More borrowing
  • Less saving
  • Improving economic climate
• An overdraft is an emergency loan, that can be secured in short term, but has very high levels of interest
• Consumer spending refers to the value of goods and services bought by consumers over a time period
• Income elastic products are those whose sales are sensitive to changes in consumers incomes
• Income inelastic products are those whose sales are insensitive to changes in consumers income
• Income elastic vs inelastic

  Elastic:

  • Fine wines
  • Luxury travel
  • Sports cars

  Inelastic:

  • Water
  • Basic foods
  • Petrol for cars