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CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment

Which of the following is classified as an element of the economic environment of a business rather than its social or political environment?

Government fiscal policy on taxation and public expenditure is part of the economic environment because it influences income levels, demand, costs and investment. Consumer attitudes and family structure are social factors, and a change of ruling party is political, so they are not economic environment elements.

  1. AConsumer attitudes towards branded goods
  2. BGovernment's fiscal policy on taxation and public expenditureCorrect
  3. CChange in the ruling political party at the Centre
  4. DDemographic shift towards nuclear families

Explanation

Fiscal policy, covering taxation and public spending, directly affects income, demand and costs, so it belongs to the economic environment. Consumer attitudes and family structure are social factors, while a change in ruling party is a political factor.

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