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Cambridge IGCSE Business Studies (0450) · 6 External influences on business activity
Mini-Lesson

External influences on business activity

This mini-lesson covers Cambridge Section 6 — External influences on business activity: economic issues (government, taxes, interest rates), environmental and ethical issues, and the international economy (globalisation, multinationals, exchange rates).

economicissuesethics &environmentinternationaleconomy outside forces businesses must respond to

Work through each screen, answer the questions as you go (some are wordy, some are calculations) and collect ⭐ stars. Press Start when you're ready.

6.1 Economic issues

Economic issues & government

Governments influence business through economic policy:

  • Taxes — higher taxes reduce spending power and profit; lower taxes do the reverse.
  • Interest rates — the cost of borrowing; higher rates cut spending and raise loan costs.
  • Government spending and subsidies can support businesses.
  • Objectives: low inflation, low unemployment, economic growth.
Quick check

Effect of higher interest rates

?A government raises interest rates. What is the most likely effect on a business with a large loan?
Calculate

Your turn — effect of a tax

1A product's pre-tax price is $50. A 20% sales tax is added. Calculate the price the customer pays.
$
Hint: price with tax = 50 × (1 + 0.20) = 50 × 1.20.
Calculate

Your turn — loan interest

2A firm borrows $30,000 at 7% simple interest per year. Calculate one year's interest.
$
Hint: interest = loan × rate = 30,000 × 0.07.
6.2 Environmental & ethical

Environmental & ethical issues

Businesses face pressure over their impact:

  • Environmental: pollution, waste, use of scarce resources; pressure to be sustainable.
  • Ethical: honest marketing, fair pay, fair treatment of suppliers.
  • Sustainability & external costs — costs borne by society, not just the firm.

Trade-off: being green or ethical can raise costs and prices, but can also improve reputation and attract customers.

Sort it

Economic, environmental or ethical issue?

Tap an issue, then the group it best belongs to.

💷 Economic

🌱 Environmental

🤝 Ethical

6.3 International economy

The international economy

Globalisation increases links between countries. UK/international firms are affected by:

  • Imports and exports, and multinational companies (MNCs) operating across borders.
  • Exchange rates — the value of one currency against another.
  • Free trade, tariffs and trade barriers.

Exchange rate rule: if a currency strengthens, imports become cheaper and exports become dearer; if it weakens, the opposite.

Match it

Match the term to its meaning

Tap a statement on the left, then the correct term on the right.

Statement
Answer
Calculate

Your turn — export price abroad

3A firm sells a machine for $4,000. The exchange rate is $1 = €0.90. Calculate the price in euros.
€
Hint: multiply by the euro rate: 4,000 × 0.90.
Calculate

Your turn — cost of an import

4A firm imports goods priced at €5,400. The exchange rate is $1 = €0.90. Calculate the cost in dollars.
$
Hint: divide by the euro rate: 5,400 ÷ 0.90.
Calculate

Your turn — tariff added

5An imported item costs $800. A 15% tariff is added. Calculate the total cost after the tariff.
$
Hint: total = 800 × (1 + 0.15) = 800 × 1.15.
Quick check

Effect of a weaker currency

?A country's currency weakens against others. What happens to the price foreigners pay for that country's exports?
Quick check

Impact of a multinational

?A multinational company opens a factory in a developing country. Which is a likely benefit for that country?
Recap

The big ideas to know

Economic issues: taxes, interest rates, government spending; aims of low inflation, low unemployment, growth

Environmental & ethical: pollution, sustainability, honesty, fair pay — trade-offs with cost

International economy: imports, exports, multinationals, tariffs

Exchange rates: a stronger currency = cheaper imports, dearer exports (and vice versa)

Evaluate both benefits and drawbacks of external influences

You've covered Cambridge Section 6 — External influences on business activity. Press Finish to see your score.

🏆

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