Some Basic Propositions

As a prelude to the description and analysis of business environmental any economy, you may examine the three basic proportionals as given below : 

1. business is an economic activity, 
2. business firefly is an economic.unit, and 
3. business decision-Nagasaki is an economical process. 

These propositions may be examined separately or jointly to justify the study of economic  environmental of business in any country. 

Business is an economic activity 

An economic activity is the task of adjusting the means (resources) to the ends (targets), or the ends to the means. An economic activity may assume different forms such as consumption, production, distribution and exchange. The nature of business differs. depending upon the form of economic activity which is being undertaken and organised. For example, manufacturing business is summarily concerned with production; stock exchange business is mainly concerned with the buying  and selling of shares and debentures; the business of government is to run  A the administration. The government may also-own control and manage public enterprises, and the business of banks is to facilitate transactions in short-term and long-.funds. These examples can be easily multiplied. The point to be noted is  , that each business has a target to achieve and for that, each business has some resources at its disposal. Sometimes the target has to be matched with the given target. Either way, the task of business is to optimise the outcome of economic activities. 

A business firm is an economic unit 

A business firm is essentially a transformation unit. It transforms input into output goods or services or a combination of both. The nature of input requirements and the type of output tows. are determined by the size, structure, location and efficiency of the business firm under consideration. The business  firms may be of different sizes and forms. They may undertake different types of activities such as mining, manufacturing, farming, trading, transporting, banking etc. The motivational objective underlying all these activities is the same, viz. profit maximisation in the long-run. Profit is essentially 'a surplus value' - the value of output in excess of the value of input or the surplus of revenue over the cost. A business firm undertakes the transformation process to generate 'this surplus value'. The firm can grow further if the surplus value is productively invested. The firm, therefore, carefully plans the optimum allocation of resources (input of men, money, materials, machines, time, energy, etc.) to get optimum production. The entire process of creation, mobilisation and utilisation of surplus constitutes the economic activity of the business' firm. 

Business decision-making is an economic process 

Decision-making involves making -a choice from a set of alternative courses of action. Choice is at the root of all economic problems. The question of choice and evaluation arises because of the relative scarcity of resources. If the resources had not been scarce, an unlimited amount of ends could have been satisfied. But the situation of resource constraint is very legal. A business firm seriously thinks about the optimum allocation of resources because resources are limited in supply and most resources have alternative uses. The firm therefore, intends to get the best out of given resources or to miniseries the use of resources for achiever a specific target. In other words, when 'input' is the constraining factor, the firm's  decision variable is the 'output'. And when 'output' is the constraining factor: the firm's decision variable is the 'input'. Whatever may be the decision variable, procurement or production, distribution or sale, input or output decision-making is invariably the process of selecting the best available alternative. That is what makes it an economical pursuit. 

Since business is  economic activity, a business unit and business decision-making, an economic process, it is the economic environment of business which is a primary consideration in evaluating business (policies, business strategies and business tactics of corporate entity in any national economy).