The external influences on the firm

The external influences on the firm

Chapter 1

The external influences on the firm (the business environment) e.g. competition it faces, the prices its suppliers charge, the level of interest rate.

Internal decisions of the firms. How to decide on prices, marketing investment.

The role of business economists is description, analysis and recommendations.


4要素 to business environment: political (govt actions),economic(the cost of raw material), social/cultural and technological.

一个公司的BE is largely beyond its control:the state of national economy and for international trading companies of global economy.

Economic environment 分成2 levels:宏观和微观


Market environment: 想要取得成功, 需要有正确的产品和策略,这意味着要理解什么创造了市场,顾客的需求对产品价格的改变,提供什么样的服务。低价是成功的关键但质量也需要保证。Sustainability and environmental issues也很重要。 Sustainability report address human rights and working condition.特别是低价的工厂如何去pay 和工作条件。



The division of the factors affecting a firm into political, economic,social and technological is commonly known as a PEST analysis, add a further 3 factors to create STEEPLE analysis, environmental (ecological) factors, legal factors( 产品安全标准)ethical factors。

法律和政府政策可以反应社会态度,科技因素可以决定经济, 像成本,生产力

Deindustrialization: the decline in the contribution to production of the manufacturing sector of the economy.

Classifying firms into industries(可以帮助我们分析经济趋势)

An industry refers to a group of firms that produce a particular category of product. Industries can be grouped together into broad industrial sectors.

区分的太远,可能没有替代品, 区分太近, 忽视竞争者。要取决分析的目的。Industry 的定义是基于supply的特点而不是消费者的质量上。

Standard industrial classification: the formal classification of firms into industries used by the government in order to collect data on business and industry trends.

Industrial concentration: the degree to which an industry is to dominated by large business enterprises.

Structure-conduct-performance:business performance is strongly influenced by the market structure within the firm operates. 市场竞争越激烈,商家越aggressive 为了去卖产品保持竞争。竞争越小, 越加价。

Chapter 2

Scarcity定义:the excess of human wants over what can actually be produced to fulfill these wants.

The factor of production(input):

Human resource: labor

Natural resources:land and raw materials

Manufactured resources: capital

微观经济研究individual units 像household,firms and industries.宏观经济研究整体,关心aggregated demand and supply.


Rational choices: choices that involves weighting up the benefit of any activity against the opportunity cost. It involves weighting up marginal cost and marginal benefits.

MB>MC rational to do

Planned or command economy:An economy where all economic decisions are taken by the central (or local) authorities. Free-market or laissez-faire economy An economy where all economic decisions are taken by individual households and firms, with no government intervention. Mixed economy An economy where economic decisions are made partly through the market and partly by the government.

Inflation refers to a general rise in the level of prices throughout the economic.

Balance of trade deficits are the excess of imports over exports. If AD up, part of the extra demand will be spent on imports.

If AD is too low relative to AS, results unemployment and recession.

Chapter 4

In the free market, individuals (consumers and firms) are free to make their own economic decision (demand decision and supply decision).

Shortages: D>S, price up, incentive to producers to supply more, discourage consumers to buy more.

Surplus: S>D, price down,

D=S, equilibrium

In labor market, firms are the demands of labor, households are supply of labor, a surplus causes wage rate fall until D=S.

The law of demand: when the price of a good rises, the quantity demanded will fall.


· Ppl will feel poorer, cannot afford to buy, the purchasing power of the income has fallen, 这叫 income effect of a price rise.

· The price has risen relative to other goods, ppl will thus switch to alternative or substitute goods.这叫 the substitution effect of a price rise.

决定demand因素:taste, the number and price of substitute goods and complementary goods.( 替代品价格越高,人们对此产品对需求量越大),income, distribution of income,expectation of future price change

Inferior good:D 下降当收入增加的产品

Change in demand: a shift

Change in quantity demand:a movement along demand curve to a new point.


决定supply因素:change in input price,change in technology, organizational changes,government costs, the expectations of future price change, the numbers of suppliers.

The profitability of goods in joint supply:当一种产品被生产,另一种产品也同时在生产。

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