ECONOMIC FACTORS

AFFECTING BUSINESS
Dr. Chhavi Jain
 FACTORS AFFECTING BUSINESS

• Natural resources • Transport and communication

• Human resources
• Population
• Socio-cultural systems
• Technological development
• Form of economic system
• International condition
Dr. Chhavi Jain
• Entrepreneur and innovation
• Education system
• Economic laws
• Capital and money market
• Market conditions
• Government policies
 NATURAL RESOURCES

• Natural resources like soil, mineral resources, water level,

vegetation, topography, rainfall, etc. affect economic environment.
• Favourability, abundance and complete utilisation of natural
resources assist in economic prosperity, development and
increase in employment opportunity.
• While lack of natural resources may cause famine, starvation,
unemployment, backwardness.
Dr. Chhavi Jain
 HUMAN RESOURCES

• Population, growth rate, age composition, life expectancy, family

size, spatial dispersal, occupational status, employment pattern
affect demand for goods and services.
• Large population in any country indicates increase in labour
supply and adversely affect wage rates but also attracts more
demand for products.

Dr. Chhavi Jain

 POPULATION

• Over population as well as under population adversely affects

economic environment. The availability of adequate labour force
skilled or unskilled helps in the industrial development of a
country.
• Over population generates unemployment, poverty, starvation
and immorality. It also creates low per capita income and low
living standard.
Dr. Chhavi Jain
 SOCIO-CULTURAL SYSTEMS
• Buying and consumption habits, language, beliefs, values,
customs & traditions, taste, preference, education affect
economic environment.

Dr. Chhavi Jain

 TECHNOLOGICAL DEVELOPMENT

• Keeping pace with the fast changing Technology and modifying

the product accordingly may facilitate growth.

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 FORM OF ECONOMIC SYSTEM

• Capitalist
• Socialist
• Mixed

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 INTERNATIONAL CONDITION

• Foreign aid, Foreign Trade Policy, Balance of Trade and Balance of

Payment, Exchange rate, etc. affect business.

Dr. Chhavi Jain

 TRANSPORT AND COMMUNICATION

• Developed transport and communication system helps in

economic development.

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 ENTREPRENEUR AND INNOVATION

• Entrepreneur mobilizes natural and human resources with the

help of innovation and economic development. Developing
countries lack able entrepreneurs.

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 EDUCATION SYSTEM
• System which puts stress on self reliance and co-ordination with
the business environment helps economic development.
• Agriculture, industries and trade are influenced by education
system.

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 ECONOMIC LAWS

• MRTP Act, Court Laws, Industrial Laws, Commercial Laws,

Factories Act, etc. affect business environment.

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 CAPITAL AND MONEY MARKET

• Developed capital and money market provides finance and helps

in plan implementation.
• If developed it reduces dependence on foreign capital and helps
in achieving self sufficiency.

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 MARKET CONDITIONS

• Perfect competition- optimum utilisation of resources is possible.

• Monopoly- low production, high cost, monopoly profit,
exploitation of consumers.
• Imperfect competition- cut-throat competition.

Dr. Chhavi Jain

 GOVERNMENT POLICIES

• Industrial Policy, Fiscal Policy and Liberalisation may support or

give threat to business.

Dr. Chhavi Jain