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Business Level 3 Unit 1 M3

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Describe what impact this would have on the activities carried out by two different functional areas of Burberry (P5)
Inflation rate is the rise of the general price level of goods and services. When these prices increase consumers purchase less because the prices may not be affordable for them. There will be more disposable income to buy goods or services even if the inflation rate rises. However the amount purchased also depends if the good or service is elastic or inelastic. This means that if its elastic people will buy it based on its price, if the prices are low there will be more demanded whereas if the price increases demand will fall which shows an inverse relationship. On the other hand, if it’s inelastic people will have to buy it despite its price as the good or service is a necessity. Inflation rates make it difficult for firms to keep up with the competition and also to predict their cost. …show more content…

However in the UK the inflation rate isn’t too high so they won’t have to worry as much into buying cheaper resources even though this could increase the total revenue and profit that Burberry makes each year. Burberry could buy cheaper resources in order to reduce the cost of the products and services. This would make Burberry not increase its products price which would affect the quantity demanded by customers, meaning it wouldn’t change. This happens because customer behaviour changes to the prices of the products and if prices are too high the amount of quantity demanded will fall. Adding on to what’s already been said the resources that are needed to expand the output from Burberry become scarcer meaning that there are only limited resources to fulfil the unlimited wants of customers. This will then lead to the business coming up with different strategies on how to use this limited resources sufficiently in order to make the

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