The Economy in Business

Lower the price for a product higher the demand from the public.

Higher the price for a product means higher demand for stores to supply it.

Government try to make the public happy by managing the economy all the time. The government use taxes to raise money to spend it on the benefit of the country.

The taxes pay for police, NHS, Armed forces, Education etc. Tax is also used to affect the public in the way they spend money.

Tax increase leads to people having less income in their job. This starts a chain reaction of the persons purchasing habit and changes their demands for specific products. E.g. expensive products get forgot about and cheaper brands become more popular.

People will demand a pay increase from their firm and if the company accept it means they may have to get rid of other people because they can’t afford all the people they have employed. This then increases the cost for benefits because more people become unemployed.

Interest rate are also important to the management of an economy. Interest rates is the cost of borrowing money e.g. students loan. In a company the idea is they borrow money from another company to then make the money back and then make a profit because of this basically every company is in debt somewhere.

Finances 

About the control of money and flows of money. Definitions companies need to know.

• Money means the cash you own. (Short term)

• Money means the cash you have plus the cash you can get. (Long term)

• Money means the cash you have plus the cash you can get and the loan credit you can get. (Long term)

• A cost is something you have to give to get something you want.

• A price is what an item is actually sold for.

• A profit is when there is a positive difference between cost and price (price is greater than cost)

• Income is money coming in if its cash or credit.

• Expenditure is the amount of money going out (spending)

• Debt is how much money is owed to you or how much money you owe to someone else. (often seen as the negative)

• Credit is how much is available to you beyond what you have. (Often seen as a positive element)

Two types of costs for a company: 

a direct cost meaning costs that are directly attributable to its use.

A indirect cost is a cost towards a attribute that is harder to justify because of the way it is used e.g. heating a workplace because it applies to everyone that works there.  

Personal costs

Cost of running the business, costs that can’t be directed to a client like the heating, lighting, building repairs, management costs etc.

Costs of undertaking projects, costs that can be directed to clients like the production costs and the design costs. So companies have to charge a little more than what the project costs which is payment for the time the job takes so the bills back at the company can be paid and then a profit can be made.

Summary and What Did I Learn?

This lecture was about how a company can fit in with the UK's economy and how finance works within the country. This information prepares me to understand how a company works financially and how I get paid by the company is affected by taxes etc. Overall I learnt that what ever the government do to the economy if it is increasing the taxes or reducing how much money people and companies can borrow affects everything and everyone financially over a matter of time, and it happens as a chain reaction. E.g. taxes increase, people get paid less, People ask for a raise, the company have to let people go because they have increased other people's wages, more people become jobless, thus the benefits cost increases.