SIGNIFICANCE AND ELEMENTS OF ECONOMIC E

Good Essays
SIGNIFICANCE AND ELEMENTS OF ECONOMIC ENVIRONMENT

INTRODUCTION: Economic means "pertaining to the production and use of income”. The Factors which have their affect on the working of a Enterprise are collectively known as “Economic Environment”. It includes System, Policies and Nature of an economy, Trade cycles, Economic resources, Level of Income, Distribution of income and wealth etc. The Economic Environment represents the Economic conditions in the country where the international organization operates. Economic environment is very dynamic and complex in nature. It does not remain the same. It keeps on changing from time to time with the changes in an economy with the changes in Govt. policies, political situations. It is concerned with the nature and direction of economy in which the organizations operate. Important elements that affect the Economic Environment are :
Economic systems.
Economic policies.
Economic conditions.
Regional Economic groups.

1. Economic Systems: Determines the scope of private and public sector ownership of the factors of production and market forces. The Different types of Economic Systems are:

Market Economy (or) Capitalistic Economy :- Business units or factors of production are privately owned and governed
Command Economy (or) Socialistic Economy :- Government controls most of the factors of production decisions
Mixed Economy :- Combination of both Capitalistic and Socialistic economy.
2. Economic policies: Business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are:
Industrial policy.
Fiscal policy.
Monetary policy.
Foreign investment policy.
3. Economic conditions: Economic conditions such as standard of living, purchasing power of public, demand and supply, distribution of income etc., largely affects the size of the market.
4. Regional Economic Groups: They promote cooperation and free

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Nsl Study Guide

    • 1431 Words
    • 6 Pages

    In a ________________economic system the government makes all of the decisions and controls many of the businesses.…

    • 1431 Words
    • 6 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Russia Review Sheet

    • 329 Words
    • 2 Pages

    Command Economy: an economy in which production, investment, prices, and incomes are determined centrally by a government.…

    • 329 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    BUSI 530 DB2

    • 578 Words
    • 2 Pages

    Economic environment. Several economic conditions related to the status of financial conditions in a specific region during a specific period have a profound impact on the value of company. According to Investor Education Fund (2014), economical factors are interest rates, inflation, deflation, economic outlook, economic and political shocks, and changes in economic policy. Those factors also include expensive materials and accessibility of capital.…

    • 578 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    The economic environment is basically all the economic factors brought together. By saying economic factors, I mean aspects such as; employment, inflation, interest rates, productivity and wealth. All of these elements mentioned above have an influence on the buying behaviour of consumers and organisations.…

    • 3302 Words
    • 14 Pages
    Powerful Essays
  • Satisfactory Essays

    Discussion Question 1

    • 328 Words
    • 2 Pages

    In a command economy, there is safety and security. The government makes most of the decisions as to who is employed and what gets produced. And they strive to make sure their decisions works for all involved. One of the drawbacks is that there are limits as to who, what, where, when and why when it comes to the product produced.…

    • 328 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. Typically associated with a socialist or communist country.…

    • 5533 Words
    • 23 Pages
    Powerful Essays
  • Powerful Essays

    Economic environment of business has reference to the board characteristics of the economic system in which the business operates. The business sector has economic relation with the government, capital market; household sector and global sector. These sectors together influence the trends and structure of the economy. The form and functioning of the economy vary widely. The important external factors that affect the economic environment of a business are;…

    • 1678 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    STEP Analysis

    • 2105 Words
    • 9 Pages

    Economic: The economic structures and its varies changes at the stock exchange and the interest, and inflation rates and nation’s economic rules and performances. They directly have a great impact on the company.…

    • 2105 Words
    • 9 Pages
    Powerful Essays
  • Better Essays

    Economic Environment refers to all those economic factors, which have a bearing on the functioning of a business. Business depends on the economic environment for all the needed inputs. It also depends on the economic environment to sell the finished goods. Naturally, the dependence of business on the economic environment is total and is not surprising because, as it is rightly said, business is one unit of the total economy.…

    • 2877 Words
    • 12 Pages
    Better Essays
  • Powerful Essays

    Business Environment is the world around a company over which it has no direct control. It covers many dimensions impacting a company's activities & performance. It is an aggregate of all forces & factors external to the business enterprise, but which influence it's functioning. There is a mutual inter-dependence between business and its environment. A business enterprise is an open system and it continously interacts with its environment. Businesses take inputs like raw material, capital, labour, energy, etc. from the environment, and transform them into goods & services, and then send them back into the environment. Interaction between business and environment is in various ways such as: exchange of information, resources, influence & power. There are several layers of influences surrounding a business. The outermost layer, called the macro-environment, consists of dimensions that impact almost all companies in an economy. These factors are the six aspects of business environment Political, Economical, Social, Technological, Environmental, & Legal. Political environment includes factors like a country's political system, type of goverment, centre-state relations, public opinion, law & order, nature of government policies towards business - particularly those related to taxation, industrial relations, regulation of business & industry, and foreign trade regulations. It also relates to the stability of the government in power, the risk of major political disturbances, or threats from anti-social elements, terrorists or other countries. In the period prior to liberalisation, India's annual growth rate was low at around 3.5%, only a few licenses were given out for important sectors like steel, electrical power, energy and communication, and these licence owners built up powerful corporate empires. India at that time was a socialistic economy with excessive govt. control. Core industries were directly managed by the govt. as…

    • 3137 Words
    • 13 Pages
    Powerful Essays
  • Powerful Essays

    Business Management 1B

    • 1594 Words
    • 7 Pages

    The economic environment, in which factors such as inflation, exchange rates, recessions, the bank crisis and the price of metals , and monetary and fiscal policy influence the prosperity of the business organization…

    • 1594 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    Be Notes

    • 30703 Words
    • 123 Pages

    Business environment in the present era of economic liberalization, privatization and globalization is becoming increasingly complex, unstable and unpredictable. The environment is the resultant of a number of interacting and constantly changing social and economic forces and thus remains in a state of flux. Variations in the overall and sectoral rates of growth…

    • 30703 Words
    • 123 Pages
    Powerful Essays
  • Good Essays

    Capitalism

    • 547 Words
    • 2 Pages

    A system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit. The production of goods and services is based on supply and demand in the general market (market economy), rather than through central planning (planned economy). Capitalism is generally characterized by competition between producers. Other facets, such as the participation of government in production and regulation, vary across models of capitalism.…

    • 547 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    ECO/561

    • 297 Words
    • 2 Pages

    Every economy encounters economizing problem like how to determine what goods to produced, how the goods are produced, who consume them, how supply and demand of goods are managed, and how technology is used to promote the progress of economy resources. Fundamentally, two types of economic system are used to combat the economizing problem. An economic system where government owns most resources, controls and coordinates most economic activity is the command or communism economy system. Secondly, the capitalism or market system is where individuals in a given society own resources, capital, and the autonomy to engage in economic activity.…

    • 297 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Scarcity and Economics

    • 686 Words
    • 3 Pages

    Command economy; is the socialist economic system with centralized government control of production, distribution policy. The economy has only has public sector, and government decides how will scarce resources were to be used and government also will decide what is to be produced and how much should be charged for goods and services accordance with national and social objectives. Planned economies are in contrast to unplanned economies, such as market economy where production, distribution and pricing and investment decision are made by private owners of the factors of production based upon their individual interests rather than upon a macroeconomic plan. Eg; The SOVIET UNION and communist China in the 20th Century operated under this economic system.…

    • 686 Words
    • 3 Pages
    Satisfactory Essays