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    Business economics

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    All questions are essay questions. Two or three word responses will not suffice.

    1. Identify and discuss each of the five elements in the business environment.
    2. Identify and describe the 4 basic rights that form the foundation of capitalism
    3. Explain how prices are determined in a free-market economy.
    4. Explain the difference between comparative and absolute advantage in global markets.

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    Solution Preview

    1. What are the five elements of a business environment?
    Business environment consist of all the factors that directly or indirectly affects the organization's business decision. It consists of internal as well as external environment.
    Internal environment includes:
    a) Management: it is about the internal management structure, control, management styles the affects the organizational decision.
    b) Manpower: it is the human resource of the firm that makes up the work for the organization and execute the actual task for the firm.
    c) Machine: it is about the infrastructure that the firm has and made up of machinery and systems.
    d) Material and money: it includes the financial strength and resources that the firm has with them. Money act as important source for decision making as most of the decision based on the financial resource of the firm
    External environment influence the firm's decision from outside the firm and affect indirectly and firm has not the direct control over the firm. These include:
    a) Political environment: it is about the political system of the country or region and their system of working influence the decision.
    b) Socio-cultural environment: it made up of social environment and cultural value of the society. Firm has to make decision ethically when it comes to social and cultural environment as they need to market the product and services that doesn't hamper their social and cultural value.
    c) Technological environment: it made up of technical resource available in the market and constraints. Whether the firm able to acquire the latest and competent ...

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