Environmental Economics Business Definition - Importance, Factors, Characteristics

Meaning of Environmental Economics Of Business – ​​The economic environment (Economic Environment Of Business) of a country mainly affects the business. Every business requires an economic environment. Production, marketing, distribution, investment, financial planning are determined by the economic environment itself. Economic environment is also made up of different types of economic systems. Different types of economic systems have been adopted for economic development in different countries of the world, such as capitalism, socialism and communism etc.  An Introduction To Environmental Economics

Environmental Economics Of Business Definition 

Landlords, farmers, capitalists, workers, producers, consumers, employers etc. also contribute in the formation of economic environment. The economic aspect of any business is the most important. Therefore, it is very important to study the economic environment.

Environmental Economics Business Definition
Environmental Economics Business Definition

The major factors affecting the economic environment of business are (a) economic system (ii) economic policies, (iii) Current economic conditions in the country.

Environmental Economics Business System

The economic system existing in any country has a great impact on business. To understand the economic environment, it is very important to understand and know the economic system of the country concerned. Economic systems are mainly of this type

(A) Capitalism

Capitalism is such an economic system, under which all the means of production are owned and controlled in the private sector. In this, goods and services are produced and distributed with the motive of personal profit. It has free competition and the right to private property. In the capitalist economic system, the business is dominated by the consumer. In this, all economic activities are operated and regulated by the capitalists. In this, the government does the work of internal and external security.

(B) Communism

Communism is a system under which all the means of production are owned and controlled by the government. The communist economic system is found in countries like Russia and China. In this, there is government control over all production and distribution. The size of production, target, distribution system, allocation of resources, fixation of price etc. are done by the government.

(C) Mixed economy

The path between both capitalism and socialism is that of mixed economy. India is a good example of a mixed economy. It includes both government control and private control. In this, the basic industries are owned and controlled by the government and the rest of the industries are privately owned and controlled. In mixed economy, an attempt is made to combine the advantages of both capitalism and socialism to remove their demerits, such as exploitation, monopoly, centralization of economic power, etc.

Current Economic Conditions In The Country

On the basis of the economic conditions present in any country, the possibilities of economic development can be ascertained. By improving the economic conditions of the country, the standard of living of the people can also be improved. The presence of good economic conditions is a sign of good economic wealth. Considering the economic conditions as the basis of planning and development, the government conducts many programs.

Economic policies

Economic policy is that government policy which is concerned with the direction, control and regulation of all economic activities of a country. The economic policy of the government has a direct impact on the business. Economic policy has an unfavorable effect on a particular type of business, while some have a favorable effect and some have a neutral effect. In the economy of any country, through economic policies, employment opportunities are created, poverty alleviation, savings and investment promotion, control of issue expansion and contraction, foreign investment control, export promotion, import control etc.

Many types of policies are included in economic policies. These include industrial policy, budget policy, trade policy, tax policy, licensing policy, mineral policy, subsidy policy, forest policy, communication policy, transport policy, monetary policy, price policy, import policy. Export policy, food policy, fertilizer policy etc. are included.

Environmental Economics Characteristic

1. Related To Economic Activities

The economic environment is related to the economic activities of human beings. It includes all the activities related to earning income and spending it efficiently.

2. Effect of Environment

The economic environment is influenced by the geographical, social and political environment, it is influenced by national and international conditions.

3. Distribution of Wealth in The Society

If there is an unequal distribution of wealth in the society, then there is a centralization of economic power, which encourages economic inequality and exploitation. This increases theft, bribery and corruption.

4. Availability of Capital

If capital is available in sufficient quantity, then natural and considered resources are fully utilized and this increases income, employment, investment and economic development in the country.

5. Planned Economy

In a planned economy, the state has authority over all the resources and a central planning authority makes planned use of the resources available in the country on priority basis. Behind every action, social interest is kept in mind. All types of decisions are taken by the central planning authority.

6. Moral Factor

The moral level of the people also affects the economic environment. If the moral level of the people has fallen, then economic activities will expand.

7. Guidance And Operation By The Government

The economic environment runs under the guidance and control of the government. In a capitalist economy, the government follows the policy of least intervention. In socialist economies, the government itself conducts economic activities. The economic environment is influenced by government policies, guidance, motivation, control aid etc.

8. Infrastructure

The economic environment is affected by the basic facilities like electricity, water, power, transport, communication, banking, insurance system etc. If these facilities are available, then economic development is rapid. Lack of it hinders development

9. View of The Public

If the public believes in spending their entire earnings and thinks that eat, drink and have fun, then the feeling of earning money will not develop in any way in the economic environment. If the attitude of the people is spiritual then economic development gets curtailed.

10. Economic Ideology

All types of economies also affect the economic environment. The economic environment of the country which has the kind of ideology will be different from other countries. Factors affecting the economic environment or parts of the Environmental Economics

Environmental Economics Factors

Some of the major factors affecting the Environmental Economics are as follows:

Natural Resources

The natural resources present in any country affect the economic environment. Adaptation to natural conditions, abundance of natural resources and their proper exploitation leads to economic prosperity, development and increase in employment. In the absence of natural resources, the condition of poverty, hunger, unemployment and backwardness is seen in the country. Many countries are underdeveloped due to lack of natural resources or their proper exploitation.

Governance System

State system or governance system also affects the economic environment. In the communist system, efforts are made to achieve rapid economic development and maximum social welfare through collective ownership and central planning on the means of production. But in this there remains the absence of personal freedom and the end of personal courage. On the one hand political cohesion helps in the development of the country and on the other hand political instability hinders the development of the economy. For this reason, suitable governance system according to the circumstances of the country helps in its economic development.

Money Market & Capital Market

Money market and capital market have a very important place in the construction of economic environment of every country. The more organized and developed these markets, the more economic mobility will be in the capital in that country. The success of the credit control policies of the central bank depends on the money market itself. If the country's money market is active in the right direction, then the pace of economic development will be fast. Apart from the money market and capital market, the financial institutions of the country also affect the economic environment.

Human Resources

Human beings are the means of production on the one hand, while on the other they are also the consumers of production. In countries where manpower is healthy, intelligent, skilled, trained and sufficient, the rate of economic development remains fast in those countries. Lack of labor force, unskilled and unhealthy labor force hinders economic development. Technological development in the country, quantity and size of production is also dependent on the availability of manpower and its efficient use.

Social & Cultural Systems

Social and cultural systems also affect the economic environment. If the social and cultural systems of the country are advanced, then it will contribute to the economic development and growth of the country, laziness, depending on luck, tendency to postpone work, superstitions pollute the economic environment. In our country, the ancient traditional society, conservatism, superstition, extremism etc. have hindered the economic development.


The excess or lack of population affects the economic environment. Population is closely related to economic development. Where the density of population is high, the lifestyle, food, occupation is different from the places with less density. Industrial development is high in a country where sufficient amount of total illusion is available. In high-density areas, the means of transport and communication are also more. Due to overpopulation, many problems arise in the country.

Awareness Of Environmental Protection

The economic environment is also affected by the awareness of the geographical environment. The geographical environment includes air, water, soil, climate, etc. If man keeps the geographical environment pure and balanced, then the economic environment will continue to progress for a long time, today for the sake of economic development, man is polluting the geographical environment. The natural resources available in the country are being exploited. We can create long-term and sustainable economic development by creating awareness towards environmental protection.

Transport & Communication System

Transport and communication system are also important elements of economic environment. The development of any economy depends on advanced and modern transport and communication facilities. Means of transport and communication are important in keeping the economy dynamic.

International Conditions, Foreign Aid & Foreign Policy

International conditions, foreign aid, foreign policy, trade and balance of payments, exchange rate etc. affect the economic environment of the country. Economic and technical cooperation increases with good international relations. As a result new technology and employment opportunities increase. Economic cooperation decreases due to international tension, bitterness, hatred and war.

Economic Policies Of The Government

Various economic policies of the government, such as industrial policy, licensing policy, agricultural policy, import-export policy, price policy, employment policy, fiscal policy etc. also affect the economic environment. Appropriate economic policies of the government help in the development of agriculture, industry and trade. This increases production, income, savings, investment and capital formation and leads to rapid economic development of the country.

Market Conditions

Economic environment is also affected by market conditions, the economic environment is determined according to different market conditions. Sometimes the government also has to control the market system.

Economic System

The economic system of any country has a great influence on the economic life of the residents of that country. There are three types of economies prevalent in the world – capitalist, socialist, and mixed economy. They have some characteristics of their own. By adopting proper economic system, rapid economic development of the country can be done.

Environmental Economics Definition - Economic Role Of Government

Economic role of government – ​​Normally any government plays its role in the economy of the country in the following ways. The fulfillment of the role by regulation - The role of government regulation in the economy can be divided into two parts.

Environmental Economics - Direct & Indirect Controls 

1. Direct Control

Examples of Direct Control are Industrial Licensee Price Distribution Control When direct administrative control is applied by the government to the economy by making laws, it is considered as an effective method of control over the business world. The purpose of such controls is to protect the market structure from monopolies, to balance regional development and to encourage small and innovative entrepreneurs.

2. Indirect control

Indirect control is imposed by the government through various means such as fiscal and monetary incentives or sanctions. The government can encourage or discourage an industry through its monetary and fiscal policies. Some examples of this are changes in corporate income tax to influence economic activity, imposing higher import duties.

By Arrangement In The Constitution

In the Constitution of India, such principles have been mentioned which control the economic activities and guide the policy for the country, such as

  • The ownership and control of the important resources of the society will be done for the fulfillment of the interests of all.
  • The economic system of the country shall be conducted in such a way as to prevent the centralization of the means of production and wealth.
  • Freedom of profession, business and commerce to every citizen of the country.

Many rules have also been made in the Indian Constitution from the point of view of maintaining control and restrictions on the economy of the country. For example, the government can make laws by determining the technical qualifications for conducting business or occupation. can alter the fundamental rights to carry on business or profession. Can conduct any business, industry or service under its control wholly or partly.

Through the role of Adventurer

  1. In some countries the government plays the role of entrepreneur. This means that the establishment and operation of the business is done by the government and all the risk also lies with the government.
  2. States take risks in various fields and establish and operate various types of businesses. Many times, keeping in mind the security system of the country, from the point of view of merchant of military equipment and taking sick industries under its protection, the government plays the role of courage and gives momentum to the economy. When there is a possibility of more exploitation of consumers, the government itself conducts business and industry.

By planning

Government plays a very important role in planning in developing countries. The government performs the role of an employer for the following purposes:

  • 1. To optimize distribution of available resources and check wastage
  • 2. To remove economic backwardness and make misguided decisions.
  • 3. For maximum social welfare and freedom from exploitation.
  • 4. To provide social justice and economic security
  • 5. To increase the rate of capital formation and to achieve the latest international technical skills
  • 6. For International Peace and Security

Promoter Role

In this method the government itself is involved in various activities. It takes interest in industries, labour, agriculture and consumer affairs and provides assistance for their development. In developing countries, where there is a lack of infrastructure facilities and courage for development, the government undertakes promotional activities for the continuous development of electricity, transport, finance, marketing and training centers.

Economics Environment Of Business Importance

Describe the importance of economic environment of business

The importance/purpose of the Environmental Economics Of Business – The importance of studying the economic environment of business is being highlighted below:-

For The Successful Operation Of The Economy

It is very necessary to have proper knowledge of the economic environment for the successful operation and development of the economy. Its objective is economic development and successful operation of the economy.

Exploration Of New Resources & Opportunities

The purpose of economic environment is also to search for new resources and opportunities in the area so that new areas of development and impacts and resources can be explored.

Knowledge Of Market Conditions

It is important for business to know about the structure of the market and the changes taking place in it. It is considered very important for business to have the right information about the demand for goods, monopolies, period of recession, profit trends and business activities conducted by the state. This information comes from the study of the economic environment.

Information Economics Policies Of The Government

The economic policies of the government are an important part of the business environment and they have an important place in the business. One clearly reads the impact of the government's industrial policy, licensing policy, import-export policy, foreign exchange policy, price policy, taxation policy etc. on business. It is necessary to study the economic environment even from this evil.

Knowledge Of The Variability Environmental Economics

The purpose of the study of the economic environment is to obtain information about the variability of the economic environment so that the obstacles and challenges in economic development can be detected and overcome.

Study Of Long Term Strategies

It is very important for business to get a comprehensive knowledge of various components of economic environment to prepare long term policies, development plans and strategies of business. Familiarity with the economic environment is very important to move forward.

Professional Development & Success

Under the business environment and the continuous changes taking place in it, many opportunities can be taken optimally. Harmony, adjustment and struggle with the environment pave the way for business success.

Conditions Of Scientific & Technological Development

The growth of new scientific inventions and technological development activities in the country and abroad occupies an important place in the development of business. To adopt new products, new designs and new techniques of production, it is necessary to keep abreast of new technologies, development and scientific progress. Today any business, regardless of the country it is being run in, cannot develop by neglecting new technological and scientific methods.

9. International Events, Impact Claims International events have an immediate effect on the economies of the society. For the stability, existence, profitability and effective functioning of the business, it is necessary to study and analyze the international events, impacts and pressures. For this it is necessary to study the economic environment.

10. The purpose of the study of the economic environment is to put pressure on the environment to conform to economic development.

11. Economic Environment Study Environment can be used more and more for the economic development of the country.

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