Question

How can interest rates inflation rates changes in disposable income of people, stock market indicates, and the value of rupee, change the management practices in a business enterprise. ? explain with the help of an example. CLASS 12 BUSINESS STUDIES

Answer 1

Answer:

DIMENSIONS OF BUSINESS ENVIRONMENT - DEFINITION

There are 5 dimensions to business environment. These are economic, social, legal, political and technological.

Interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect management practices in a business enterprise.

The social environment of business include the social forces like customs and traditions, values, social trends and societys expectations from business. For example, the celebration of Diwali, Id and Christmas in India provides significant financial opportunities for greetings card companies, confectionery manufacturers, tailoring outlets and many other related business.

Technological environment could influence businesses because of a new product or technique of producing a new product. For example, recent advances in computer have given rise to innovative marketing strategies.

Political environment includes political conditions such as general stability and peace in the country

Legal environment includes various legislation passed by the Government administrative orders issued by government. It also includes the decisions rendered by various commissions and agencies.

ECONOMIC ENVIRONMENT IN INDIA - DEFINITION

Current economic development, economic structure, economic policies and economic indices can affect a business.

The Indian economy has changed a lot since independence due to government policies. The objectives of the policies are as follows.

Initiate rapid economic growth to raise the standard of living, reduce unemployment and poverty.

Become self-reliant and set up a strong industrial base with emphasis on heavy and basic industries.

Reduce inequalities of income and wealth.

Adopt a socialist pattern of development based on equality and prevent exploitation of man.

Answer 2

Interest rates and inflation rates change the disposable income of people, the stock market indicates, and the value of the rupee has the power to change the management practices in a business enterprise. The following points can justify the given statement:

• The Long and Short-term interest rates affect the demand by the consumers of the product or services in the market.
• Most of the construction companies or automobile manufacturer firms prefer only low rates in longer terms beneficial as they lead to increased spending by the customers for buying cars or building homes on money borrowed from the market.
• Also, Rising interest rates limits or reduce inflation while decreasing interest rates lead to speeding inflation in the country. When interest rates tend to decrease, it is seen that consumers spend more on goods and services as the cost of goods and services is cheaper because financing and borrowing money is cheaper and affordable.

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