Summary
Summary D1 Unit 38
- Institution
- PEARSON (PEARSON)
Distinction achieved in Unit 38
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Neil Patel 40068068 Unit 38 D1D1: Evaluate the impact of changes in the economic environment on a selected
business
In this task, I am going to evaluate the impact of changes in the economic environment on
my selected business which is Balfour Beatty. The changes that I will be talking about are:
1. The increase and decrease in tax
2. Inflation and interests
3. Changes in the supply and demand
4. Changes in policies/laws.
Balfour Beatty are heavily reliant and funded by the government in order to complete
projects. If the government makes a decision to decrease tax amounts that need to be paid,
they will be directly impacted because they will then have less money to spend towards the
public sector. This may also lead to Balfour Beatty having less contracts for their services
which slow down their business. However for Balfour Beatty this may not always be a
negative outcome because this means they can go towards private businesses and charge
them more leading to a better income for Balfour Beatty’s services. Another positive from
having less taxation is that the products and services would be made much cheaper due to
less taxation which directly impacts their profit at the end of the trading year because of less
expenditure on their supplies. Primarily through the supply side. High tax rates can
discourage work, saving, investment, and innovation, while specific tax preferences can
affect the allocation of economic resources. But tax cuts can also slow long-run economic
growth by increasing deficits. This has a negative impact towards Balfour Beatty as more
people are cutting back on investments meaning they will be having less projects to provide
services for. With the economic environment being affected through this, an increase in
taxation means has a chain effect which leads to an increase in inflation rates. This means
that there will be less investments coming towards Balfour Beatty and therefore having a
negative impact towards the economy.
Interest rates is another economic change that may be affecting businesses such as Balfour
Beatty. Inflation is an increase in prices, which affects the economy by reducing the
purchase power of consumers, causing companies to earn less revenue. Inflation also
increases the rate of unemployment.
When consumers pay less in interest, this gives them more money to spend, which can
create a ripple effect of increased spending throughout the economy. Businesses such as
Balfour Beatty also benefit from lower interest rates, as it encourages them to make large
equipment purchases due to the low cost of borrowing. However, when interest rates are
lowered, for Balfour Beatty that means there is less money for them to save aside in banks
due to less annual interest payouts. Despite having that in mind, from an investor's point of
view, low interest rates means more people may be willing to spend more due to the low
percentage of bank interest rates.
When prices rise for energy, food, commodities, and other goods and services, the entire
economy of a specific country is affected. Inflation can be both beneficial to economic
recovery and, in some cases, negative. If inflation becomes too high the economy can suffer;
however, if inflation is controlled and at reasonable levels, the economy may be much better.
With controlled, lower inflation, employment increases, consumers have more money to buy
goods and services, and the economy benefits and grows.
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