Economic environment

Q: A company reviewed product price and profit margin after tax rate increased. Which economic element is involved?

Tax policy An increase in tax rates can directly affect a company's costs, product pricing and profit margin. Therefore, the relevant economic element is tax policy. Population structure may influence demand, but it is not directly related to a change in tax rates. Exam tip: Factors such as taxes, interest rates and government expenditure are part of the economic environment.

Q: If credit availability declines in the market what may happen to expansion plans of small businesses?

Expansion may become difficult Lower credit availability makes investment difficult. In exams connect credit shortage with investment constraint.

Q: An exporter planned entry into a new market after relaxation in foreign trade policy. Which economic aspect is shown?

Export opportunity Foreign trade policy affects business opportunities. In exams connect trade policy with export opportunity.

Q: Transport cost rose after crude oil prices increased and a company changed delivery charges. This is the effect of which economic factor?

Raw material and energy cost Energy prices affect cost and pricing decisions. In exams connect fuel cost with economic environment.

Q: If per capita income rises and demand for tourism packages increases what relationship does it show?

Relation between income and demand Higher per capita income can increase spending capacity. In exams connect per capita income with discretionary demand.

Q: When monetary policy becomes tight availability of money and credit may fall. How will this affect business?

Pressure on investment will increase Tight monetary policy can restrict credit and investment. In exams connect monetary tightening with credit constraint.

Q: If government reduces taxes and disposable income increases what effect is possible on consumer demand?

Demand may increase Tax cut can increase disposable income. In exams connect tax cut with disposable income and demand.

Q: A company decided to increase production capacity during an economic boom. What expectation may this be based on?

Expectation of higher customer demand In an economic boom income and demand are likely to rise. In exams connect boom with expansion decisions.

Q: If wage demand rises due to inflation which plan of the company will be affected?

Human resource cost plan When inflation rises, employees may demand higher wages or salaries. This changes the company’s estimates of salaries, allowances, and employee expenses, so the human resource cost plan is directly affected. Inflation may indirectly influence a marketing communication plan, but a rise in wage demand most directly changes employee costs. Exam tip: Link wages, salaries, and allowances with human resource cost planning.

Q: Which information from economic environment will be most useful in pricing?

Cost demand and purchasing power Pricing decisions are based on economic cost and demand. In exams connect pricing with cost and demand.

01A company reviewed product price and profit margin after tax rate increased. Which economic element is involved?

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Answer and explanation

Correct answer: B. Tax policy

An increase in tax rates can directly affect a company's costs, product pricing and profit margin. Therefore, the relevant economic element is tax policy. Population structure may influence demand, but it is not directly related to a change in tax rates. Exam tip: Factors such as taxes, interest rates and government expenditure are part of the economic environment.

Practice questions

09If wage demand rises due to inflation which plan of the company will be affected?यदि महंगाई के कारण मजदूरी मांग बढ़ती है तो कंपनी की कौन सी योजना प्रभावित होगी?

10Which information from economic environment will be most useful in pricing?आर्थिक पर्यावरण के अध्ययन से कीमत निर्धारण में सबसे अधिक कौन सी जानकारी उपयोगी होगी?

13In the recovery phase of business cycle what signal may business observe?व्यापार चक्र में मंदी से उबरने की अवस्था में व्यवसाय किस संकेत को देख सकता है?

15If import duty rises what problem can an import dependent company face?यदि आयात शुल्क बढ़ता है तो आयात पर निर्भर कंपनी के लिए क्या समस्या हो सकती है?

17When money supply increases what may happen to liquidity and spending in the market?जब मुद्रा आपूर्ति बढ़ती है तो बाजार में तरलता और खर्च पर क्या असर हो सकता है?

19Why can demand for expensive durable goods increase when consumer loans become easy?यदि उपभोक्ता ऋण आसान हो जाए तो महंगे टिकाऊ उत्पादों की मांग क्यों बढ़ सकती है?

20Why did a company consider exchange rate while fixing export price?कंपनी ने निर्यात मूल्य तय करते समय विनिमय दर को क्यों देखा?

22If economic inequality increases what should a company consider in market segmentation?यदि आर्थिक असमानता बढ़ती है तो कंपनी को बाजार विभाजन में क्या ध्यान रखना चाहिए?

Analytics choices

09If wage demand rises due to inflation which plan of the company will be affected?

10Which information from economic environment will be most useful in pricing?

13In the recovery phase of business cycle what signal may business observe?

15If import duty rises what problem can an import dependent company face?

17When money supply increases what may happen to liquidity and spending in the market?

19Why can demand for expensive durable goods increase when consumer loans become easy?

20Why did a company consider exchange rate while fixing export price?

22If economic inequality increases what should a company consider in market segmentation?