Copyright 2002 TecEd

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Competition has both positive and negative effects on the stakeholders of a business, for example its customers, employees, shareholders, suppliers, and the community. You need to understand how and why the government intervenes in markets to influence the effects of business activity on markets. You need to know about the work of the Competition Commission, and understand the ways in which the government acts to protect consumers. You also need to understand how and why the government becomes involved in environmental, social and ethical issues. You will need to explain the role the European Union plays in social and environmental policy.

The government plays a key role in establishing economic policy. It also tries to manage the economy to control the effects of market changes on stakeholders. You need to be able to analyse the impact on businesses of government policies for controlling inflation, unemployment and growth, and to evaluate the responses of businesses to those policies. You also need to be able to explain how businesses are affected by policies towards:

• taxation
• benefits, subsidies and grants
• exchange rates
• public sector services
• private/public sector partnerships
• changes in interest rates (under the control of the Bank of England).

You need to be able to describe the extent to which businesses can be affected by these policies, for example the extent to which increases in taxes can be passed on from businesses to consumers.