The External Environment

What The External Environment covers

The External Environment is examined in Unit 4, Business in a Changing World, which assesses the whole A level content. It covers government and the framework for business, the economic environment, social and demographic change, technology and business, business ethics and corporate social responsibility, the legal environment and business and the environment.

The 7 subtopics

Each one has its own page.

• Government and the framework for businessFour ways government provides a stable framework for business, direct taxation and give two examples affecting business and indirect taxation and give an example.Open →
• The economic environmentEconomic growth, four stages of the business cycle and interest rate.Open →
• Social and demographic changeDemographic change, three demographic trends affecting UK business and lifestyle change.Open →
• Technology and businessThree ways technology has changed how businesses operate, big data in a business context and cyber risk.Open →
• Business ethics and corporate social responsibilityBusiness ethics, corporate social responsibility and three ways a business demonstrates CSR.Open →
• The legal environmentSix areas of law that concern a business, purpose of employment law and three forms of intellectual property.Open →
• Business and the environmentFive potential environmental costs of business activity, external cost and three ways government can control environmental costs.Open →

What you need to know

Answer each one before you reveal it.

Take The External Environment further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Fiscal policy vs Monetary policy

  Fiscal policy: government use of taxation and public spending to influence the level of activity in the economy. Monetary policy: The use of interest rates and the availability of credit to influence demand and inflation, set in the UK by the Bank of England.

• Direct taxation vs Indirect taxation

  Direct taxation: a levy charged on income or profit, such as corporation tax on company profits or employer National Insurance contributions. Indirect taxation: A levy charged on spending rather than on income, of which VAT is the principal example.

• Demand-pull inflation vs Cost-push inflation

  Demand-pull inflation: a general rise in prices that arises when spending in the economy grows faster than the economy can supply. Cost-push inflation: A general rise in prices that arises when higher input expenses, such as wages or energy, are passed on to customers.

Questions from this topic

Each one with the model answer underneath.

1. 1

   Name four ways government provides a stable framework for business.

   Model answer

   Enforcing contracts and property rights through the law, maintaining a stable currency and public finances, supplying infrastructure and education, and regulating competition.

2. 2

   Why does a business need enforceable contracts?

   Model answer

   Without them a firm cannot rely on being paid or supplied, so trade would be limited to people it already trusts and investment would be far riskier.

3. 3

   Define direct taxation and give two examples affecting business.

   Model answer

   Tax levied on income or profit; corporation tax on company profits and employer National Insurance contributions on wages.

4. 4

   Define indirect taxation and give an example.

   Model answer

   Tax levied on spending rather than income; VAT is the principal example.

5. 5

   How does a rise in corporation tax affect a business?

   Model answer

   It reduces retained profit, so there is less to reinvest or distribute, and it may make the UK less attractive than lower-tax locations.

6. 6

   What is a subsidy, and why might government grant one?

   Model answer

   A payment to reduce a producer's costs, granted to support employment, encourage a desirable activity or keep a strategic industry viable.

What is inside Levo

Six ways to work the same material.

The External Environment revision questions

What does The External Environment cover in WJEC A-Level Business?

7 subtopics: government and the framework for business, the economic environment, social and demographic change, technology and business, business ethics and corporate social responsibility, the legal environment and business and the environment. Each one has its own page with questions and model answers.

How is The External Environment organised?

By the WJEC 601-5238-2 specification, subtopic by subtopic, so it matches the order you are taught it in.