Business Environment

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1.1 This essay will explain the basic economic problem and the types of economic systems used to resolve the economic problem. This essay will also include an explanation of the current structure of the private and public sectors of the UK economy and the competitive environment in which organisations operate and their impact on their behaviour. By using business examples, the significance of elasticity to business organisations will be explained too. The economic problem, is a theory that only finite and insufficient resources are available to satisfy the needs and desires of people. There are never enough resources to produce everything that everyone would like to produce. A lot of people will have to do without some of the things they need. Alternetively, they make choices which provide the lowest opportunity cost. The economic problem is that resources are scarce relative to the purposes to which they could be put. (Bized, 2012) Therefore, as a result, choices have to be made about how to use resources. Another term for the economic problem is 'scarcity and choice'. Money may not be a solution to the economic problem. However, to some extent it is, if used as capital for investments. The basic economic problem is that resources are scarce, but on the other hand, our needs are infinite. The resorces are classified into four categories. These are resources of the Land, Labour, that includes all the human mental and physical effort that goes into production; Capital, that includes all the equipment, machinery and buildings that is not used for its own sake; and last, Enterprise, that includes the skills needed to organise other resources into some form of production. The society must consider the most obvious needs to produce or... ... middle of paper ... .... (Answers, 2012) Businesses often strive to sell/market products or services that are or seem inelastic in demand because doing so can mean that few customers will be lost as a result of price increases. Elasticity of demand shows how many more units of a product will be sold when the price is cut or how many fewer units will be sold when the price is increased. Businesses would like to increase their unit sales, but do not want to cut prices because this could reduce profits. So they look for ways to cut prices for those customers who will only buy at lower prices. (Answers, 2012) But they try to keep prices higher for customers who will pay those higher prices. For examples, some price elastic goods are coffe, money, jewelry, hamburgers, lottery tickets, computers, tvs, cds etc. Some price inelastic goods are museum tickets, salt, gasoline, medications, food etc.

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