External influences: Practice Questions

• a.Domestic sales will automatically increase due to lower inflation
• b.The cost of importing raw materials from abroad decreases
• c.The business will see an immediate reduction in its total interest payments
• d.Exports become more price competitive in international markets

• a.Demand may fall as the cost of borrowing for consumers increases
• b.Operating costs will decrease as the value of the currency depreciates
• c.The business will likely see an increase in its profit margins due to higher prices
• d.Consumer disposable income will increase as a direct result of higher savings returns

• a.Income elasticity of demand (YED) is positive, so the company should expect a significant decline in sales revenue
• b.Income elasticity of demand (YED) is negative, so demand for the product increases as consumer incomes fall
• c.The company will experience a decrease in demand as consumers switch to luxury substitutes
• d.The company will benefit from lower interest rates which always occur simultaneously with falling demand

• a.A change in consumer tastes towards organic produce
• b.A decrease in the corporate tax rate for small businesses
• c.A severe unexpected drought affecting major farming regions
• d.An increase in the number of consumers in the domestic market

Write your answer out first, then check it against the worked solution.

Write your answer out first, then check it against the worked solution.