Question

what are the components of an economic environment?

Answer 1

Economic environment is the most significant of all the environmental forces. Economic environment refers to all the economic surrounding that influence organizational activities. Inflation, interest rate and unemployment are the crucial components of economic environment. InflationInflation is the most crucial component of economic environment. If affects overall economicsystem of the economy. During the time of inflation, the company pays more for resources and must rise its price to cover the higher costs. Interest rateInterest rate is another important component of economic environment. It is the cost of money. When interest rates are high, consumers are less willing to borrow money and the company itself must pay more when it borrows. UnemploymentUnemployment is another important components of economic environment. When unemployment is high consumers buying may decline fewer people are working.