- GCSE Revision for AQA Business Studies

2.3a The Economic Climate

Factors Affecting Customer Spending

Customers will reduce their spending because of the economic climate — these overall conditions in the country or region, and are outside a businesses control.

The main factors are:

Even if these factors have not yet happened, the fear of them is enough to make many customers reduce their spending.

Changes to Income

If income rises faster than prices…
  • Consumers have more money to spend on things they want
  • People will be willing to pay more for goods
  • Sales of goods will increase, increasing business profits
If prices rise faster than income…
  • Consumers will have to spend a greater proportion of their income on things they need (food, rent, gas, electricity)
  • This leaves less to spend on things they want
  • Sales of goods will decrease, reducing business profits


Unemployment is when a person is able to work, but cannot find a job

Retired people, those on sickness benefits, and those in full-time education are not classed as unemployed. Unemployment has a big effect on the whole economy.

Effects of Unemployment on Business

Disadvantages of Unemployment to Business
Advantages of Unemployment to Business

Common Misconception

Illustration of a warning sign

When answering questions on the effect of unemployment, make sure you answer in the correct context.

For example, if the question asks about the negative effects of unemployment to a business, your answer should be about the potential for a decrease in sales because customers have less money to spend. Do not write about a reduction in staff causing increased workload for remaining staff.