SIGNIFICANCE AND ELEMENTS OF ECONOMIC E

Topics: Economics, Policy, Economy, Economic system, Planned economy, Mixed economy / Pages: 6 (1710 words) / Published: Nov 10th, 2014
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

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