Question

how does economic environment affect business?​

Answer 1

Answer:

Basically, the very environment of the economy can have an effect on two essential aspects – your company's levels of production and the decision-making process of your customers. Some examples of economic factors affecting business: Interest rates. Exchange rates.

Explanation:

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Answer 2

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Explanation:

Economic environment affects business in many ways:

Income

Income refers to the income of the customers who is willing buy the products sell by the marketer.But customer will buy products only when they needed or whichever is desirable for them so it's depends upon customer not on customer's income. customer will not buy the product even if they have higher income if the product is not desirable to them.

Inflation

Inflation means rising or increasing in price level in the market.

If the product's cost gets cheaper then the demand for that product will be higher.cost of product can only be reduced when cost of production is less and cost of production can be less only when resources are efficiency and efficiently used.

If money supply is increased in the market then RBI make restrictions on the supply of money.If money's supply less then people have to borrow money or there should be less demand of such commodities (products) in the market which force marketer or suppliers to reduce their product cost which increases the supply.

Interest Rate

If the interest rate is higher then the companies get capital at high cost and further produce goods at higher cost .If goods' cost is higher demand will be less

If the interest rate is lower then the companies gets capital at lower cost and further produce goods at lower cost.If goods' cost is less demand will be more.

Exchange Rate

Exchange Rate means rate at which goods and services are exchanged between two parties of international.

A business exports and imports whenever there is need for making products

Export will be only beneficial when currency of Exporting country is stronger than the importing country.

suppose USA exports goods to India

1$= ₹73

Here exporting country is USA whose currency is stronger than the importing country e.g india.

If a business imports goods from those country whose currency's value is or exporting country 's currency is higher then it would be loss for the business