Question

Distinguish between the following.

Economic Environment and Social Environment.

Answer 1

Economic environment comprises the economic variables such as interest rates, incomes and stock market indices that affect the functioning of the enterprises. For example, an increase in the incomes of consumers raises the demand for goods and services of the enterprises. Similarly, a fall in the interest rates on loans for consumer durables increases the spending capacity and thereby, increases the demand for such products. On the other hand, social environment refers to the social forces, such as customs, traditions, social values, social trends, etc. For example, religious celebrations provide business opportunities to many enterprises, such as those producing sweets, decoration items, etc. Similarly, in India, a change in social trends towards western lifestyle has increased the demand for western wear, fast food, etc.