Economic factors play a significant role in making decisions and guiding one’s business. These factors are related to goods, services, and money. Despite their direct impact on businesses, these variables relate to the financial state of the economy at a higher level, whether regional or global. The purpose of this is that the economy’s position can determine many vital aspects that occur in business, including topics such as consumer demand, taxes, and asset values (Hulleman and Marijs, 56). Economic factors that affect business include interest rates, exchange rates, inflation, taxes, supply, and demand. It is worth taking a closer look at some of these examples to see exactly how they can affect business. For example, interest rates can appear in different places, imposed by several different people. The status quo on interest rates is of great interest to banking institutions. However, it can also affect companies whose strategies are based on making large loans.
Another example is exchange rates. Their change can affect how much a company must pay its international supplier to meet them, affecting profitability. Finally, an economic downturn can change customer attitudes toward products, which can cause companies to drop their prices or reduce their output. In this context, the dual impact of new technology on business development also becomes apparent. On the one hand, technology development helps provide customers with the best product, increases demand, and presents purchasers with various choices. On the other hand, in the event of an economic downturn in one company, customers will not stick with it because their choices are very rich in alternatives. In conclusion, economic factors are one of many external factors that can affect a business. Although they correlate to the economy on a broader scale, they have a profound effect on the inner workings of any business.
Work Cited
Hulleman, Wim, & Ad Marijs. Economics and Business environment. 5th ed., Routledge, 2021. Web.