Economic environment

Economic environment

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  Manish Sharma 1 Business Environment
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  Economic Environment 2 Economic environmentinclude the economic factors only and it consist of both national and international factors. Economic conditions, economic policies, economic systems, global environment etc. are part of economic environment of business.
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  Economic Condition 3 • Economiccondition reflects the current status of the economy in terms of prices, aggregate demand, aggregate supply, investment, saving, consumption, employment etc. • Recession, depression, recovery, boom are different type of economic condition.
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  Economic Policies 4 Economic policiesof the government can have a great impact on business. Industrial policy, trade policy, foreign exchange policy, monetary policy, foreign investment policy, fiscal policy etc. are some of the important economic policies.
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  Economic systems 5 Economic systemdetermines the framework within which major decisions are taken in the economy. It decides the role of individuals, market and the government. There are three major types of economic system- free market economy or capitalism, planned economy or communism, mixed economy.
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  Capitalism or freemarket economy 6 The main characteristics of capitalism are Private ownership of means of production Freedom of enterprise Profit motive Competition and active entrepreneurship Limited role of government Absence of central plan
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  Planned economy orcommunism 7 • Key features of communism are • Public ownership of means of production • Planning authority • Economic equality and classless society • Prices and Quantities to be produced are determined by government • Social welfare is the motive of the government • State is the final arbiter of all issues
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  Mixed economy 8 In mixedeconomy we see the coexistence of both private sector and public sector. Government controls and regulate the private sector Resource allocation is through the price system and government directions Welfare of poor is taken care by the government
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  Examples 9 Capitalism – USA,Canada, Western Europe etc. Communism – Cuba, North Korea, Erstwhile USSR etc. Mixed economy – India, Poland etc.
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  Examples 9 Capitalism – USA,Canada, Western Europe etc. Communism – Cuba, North Korea, Erstwhile USSR etc. Mixed economy – India, Poland etc.