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Economic Environment of Business
Economic Environment of Business
:
Economic Environment of Business(2 credits)
COURSE DURATION
:
1 hour 30 mins per week for 12 weeks
Part-I- 1) The Nature of Economic System.
1)
What is a business?
Business is an economic activity. An economic activity is the task of adjusting the
means (resources)to ends (targets) or the ends to means.
2)
3)
Since business is an economic activity, the business firm is an economic unit and the
business decision making is an economic process, it is the economic environment of
business which is a relevant consideration in evaluating business policy-business strategy
and business tactics of any corporate entity in any economy.
Business is a micro-economic unit and it functions in the macroeconomic context.
The macroeconomic environment is external to the firm. The internal business decisions
should adjust itself to external business environment -both economic and non-economic.
The firm should demonstrate adaptability and adoptability.
Business Environment is classified on the basis of certain criteria, time, space,
forces and economic and non-economic factors.
Non-economic environment of business constitute History, Culture, Sociology,
Geography, polity and Govt.
Economic environment contains three important elements:i)
ii)
iii)
Economic conditions
Economic policies
Economic system.
i)
ii)
Economic policies Fiscal policy, income policy, monetary policy, Exim policy,
taxation, savings investment policies etc.
iii)
b)
Socialist and Communist Economies:1) Social ownership of means of production (No Private property)
2) Centralized planning planning authority prepares plan for resources
allocations.
3) Social welfare rather than profit motive. In communism consumption is also
controlled by govt.
c)
Mixed Economy:1) Co-existence of public and private sector. Joint sector also.
2) Planning and price mechanism lead to resource allocation.
3) Profit motive and social welfare objective.
When the firms take eco-decisions they should take into consider the economic and
non-economic environment existing in the economic system to get a feasible business
decision.