Economic environment-Factors
The Economic environment consists of all factors that affects commercial and consumer behavior. These factors can influence the business depending on how it operates and how it became successful. The term economic environment refers to all external factors that can greatly influence the consumer buying behavior and business buying behavior that can affects the performance of the company.
The study of economic environment divides into two major branches the Micro-Economics and Macro Economics.
• Micro-Economics
Micro-Economics derive from Greek word “Micros” means Small. It deals with the individual activity of the economy. It can be one consumer, one household, firm or even one industry. It tackles about the law of Supply and demand. For example, if the price of the car goes up, what will happen in the consumer demand? If the income of individual increase, who will demand to meet the change? Meaning to say Micro economics talks about all the event that happens to individual part of the economy.
The example of Micro-Economics;
• Competitors
• Demand
• Market size
• Suppliers
• Supply
• Distribution chain
• Macro-Economics
Macro-Economics comes from the Greek word “Macros” meaning Big. It deals with the economy as a whole. It can be an issue, income, prices of goods, and national income. This are the questions answered in Marco-Economics. What happens if money supply increases? What causes the economy to grow overtime? To sum it up, Macro-Economics the thing is big.
The example of Macro-Economics
• Unemployment
• Inflation
• Interest
• GDP Growth
• Taxes
• Exchange rates
• Level of consumer confidence
• Saving rates
Macro-Economics and Micro-Economics are inter-related. In order to understand Macro-Economics, we must understand the Micro-Economics. For example, if the interest rates go down, how does it affect the national GDP? To answer this question, we need to know how consumer reacts to the interest drop. Will the individual saving less? Will the firm start to invest more? Once we understand the individual parties, we will understand the economy.
Economic environment vs. environmental economics
The Economic environment and environmental economics may sound the same but differ in meaning. Environmental economics is a sub-field of economics, it is all about environmental issues, and it became an increasingly popular topic for the last half a century. Environmental economic looks at the economic effects of local or national environmental policies across the globe, Particular issues include the costs and benefits of alternative environmental policies that deal with water quality, air pollution, and global warming.
Economic growth is the main goal of every economy in the world. Growth means more money is spent in an economy every year. There was a problem in this, even though we use up all our resources, we aren’t that grow enough to have lots of money to spend. Because of this government create taxes to support great spending. People, firm and company kept on spending by borrowing money and taking up high risk investment, these results on growing economy but increasing number of deaths.
According to Mark Swilling, our economy is measured by the amount of our GDP; it didn’t measure all the important things like how we use our resources.
According to Dr. Ashok Khosla, everybody talks about growth, but how can you have continued growth in a finite planet, finite planet forces you to think where we’re going.
According to Prof. Jacqueline McGlade, GDP is short sighted because it counts the economic gains, but it’s not a gain it’s actually a loss. If a country cuts lots of forest GDP would grow because it will be sold in the market but we didn’t give value to our natural resources.