Understanding the Business Environment: Key Features and Importance
Definition and Features of Business Environment
Definition:
According to Keith Davis, “The environment of the business means the aggregate of conditions, events, and influences that surround and affect it.”
Features:
- 1) Dynamic in Nature: The business environment is flexible and perpetually evolving. It changes frequently due to various external forces, i.e., economic, political, social, international, technological, and demographic. Business enterprises have to operate under such dynamic environmental
Understanding Consumer and Producer Surplus: Price Controls
Understanding Consumer and Producer Surplus
1. The demand curve is determined by each individual consumer’s willingness to pay. When the price is less than or equal to the willingness to pay, the consumer purchases the good. The difference between the willingness to pay and the price is the net gain to the consumer, the individual consumer surplus. Total consumer surplus in a market, the sum of all individual consumer surpluses in a market, is equal to the area below the market demand curve but
Read MoreSpain’s Economic Journey: From Crisis to Recovery
Spain’s Economic Crisis: Causes and Impact
Spain faced a severe economic crisis characterized by large debts and a weak economy heavily reliant on non-innovative sectors. These debts were primarily mortgages, often secured by inflated house values. When housing values plummeted, individuals found their assets valued significantly less than their outstanding debts. Unable to service these debts, many defaulted, leaving banks with unsellable properties. A financial crisis loomed, culminating in an
Read MoreGlobal Economic Shifts: From WWI to the Great Depression
The Economic Aftermath of World War I
European exports fell dramatically during the four years of war. Consequently, overseas countries, especially the USA and Japan, developed industries producing substitute goods. The large volume of debt incurred by some of the victorious countries, particularly Britain and France, caused these Western European nations to become debtors. In contrast, the vanquished nations, Germany and Austria, had not incurred significant foreign debts during the war. However,
Read MoreKey Concepts in Monetary Economics and Financial Markets
Functions of Money
Money serves as a means of exchange, widely accepted by the community for daily transactions and to settle debts. It facilitates exchange and eliminates the need for bartering.
As a unit of account, money is used to calculate the value of various goods and services.
Money also functions as a store of value, meaning it can be saved and retrieved later without significant loss of purchasing power.
Money Creation
Money is primarily created when a bank grants a new loan. Three main agents
Read MoreDavid Ricardo’s Enduring Economic Principles
David Ricardo was one of the fathers of classical economics. He began his business career as a clerk in his father’s brokerage firm. Some years later, a London bank, impressed by the young man’s ability, provided him with enough capital to establish his own brokerage. Soon, David Ricardo amassed an enormous fortune.
His most important work was Principles of Political Economy and Taxation, published in 1817. This treatise is considered the most mature and accurate presentation of classical economics.
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