Page 91 - F1 - AB Integrated Workbook STUDENT 2018-19

External analysis – economic factors

Microeconomics

1.1 Introduction

Part of an organisation’s external PEST analysis will involve assessing the economic
factors which will affect its industry. The key issue is to identify potential
opportunities and threats.

Economics can be defined in various ways, including:

 ‘the study of how society allocates scarce resources which have alternative
uses, between competing ends’

 ‘the study of wealth creation’.

It is useful to distinguish between two aspects of economics:

Microeconomics – the study of the economic behaviour of individual consumers,
firms and industries.

Macroeconomics – considers aggregate behaviour, and the study of the sum of
individual economic decisions – in other words, the workings of the economy as a
whole.

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