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What is Economic Development?
• Economic development is the process
by which emerging economies become
advanced economies. In other words,
the process by which countries with low
living standards become nations with
high living standards.
• It also refers to the process by which
the overall health, well-being, and
academic level the general population
improves.
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What is Economic Development?
• During the development, there is a population
shift from agriculture to industry, and then to
services.
• A longer average life expectancy, for example,
is one of the results of economic development.
Improved productivity, higher literacy rates,
and better public education, are also
consequences.
• It is all about improving living standards.
‘Improved living standards’ refers to higher
levels of education and literacy, workers’
income, health, and lifespans.
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ECONOMIC FACTORS
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• Economic factors affect the economy, including interest rates, tax rates, laws,
policies, wages, and governmental activities. These factors are not directly
related to the business but influence the investment value in the future.
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ECONOMIC FACTORS AFFECTING DEVELOPMENT
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#1 – Education and Training
• Education is the most important tool in the development of the country.
Education helps one grow and develop, resulting in the development of
the economy. And skill training helps one develop oneself, which results
in high wages and the development of the economy.
#2 – Natural Resources
• Natural resources available like a tree, water, soil, oil, coal, metal, etc.,
affect the country’s growth as if resources are available in-country.
Therefore, one will not pay for its export, and existing resources will help
in job creation and increase the country’s wealth, improving the overall
economy.
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ECONOMIC FACTORS AFFECTING DEVELOPMENT
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#3 – Power and Energy Resources
• Power and energy resources are the main resources required for industry,
company, and country. In addition, one can manufacture biogas and
natural resources like petrol, coal, gas, etc. These powers are required for
the country’s development and will affect the economy and develop it.
#4 – Transportation
• Transportation has a crucial role in economic development as the
circulation of one good or service good means of transport is required. If
a country has good means of transportation, it will increase the reach of
goods or services to consumers, which will result in the country’s
economic development.
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ECONOMIC FACTORS AFFECTING DEVELOPMENT
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#5 – Communication
• Depended too much on technology. Therefore, communication helps
in the company’s expansion and growth. These days, companies
are using modes of communications like mobile, internet, etc., to
promote their goods and services, which leads to an increase in
sales and a resulting economic development. Many other economic
factors examples help in economic development like technology,
labor force, capital, etc. Economic growth is required for the
country’s development unless, and until it has a strong economy, it
will not become a developed country
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ECONOMIC FACTORS AFFECTING BUSINESS
#1- Interest Rate
• Interest rate is a major factor that affects the liquidity of
cash in the economy. With an increase in investment,
cash flow in the country decreases and results in a
reduction in the country’s liquidity. A decrease in
investment cash flow in the country increases and
results in an increase in the country’s liquidity.
• A higher return on investment will attract investors.
But, if the interest rate on loans increases, cash flow in
the country decreases and results in a decrease in the
nation’s liquidity. In contrast, with the decline in interest
rate over a loan, cash flow in the country increases and
increases the country’s liquidity. So, the interest rate
affects the economy.
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ECONOMIC FACTORS AFFECTING BUSINESS
#2 – Exchange Rate
• The exchange rate comes into the picture in
the case of export and import. Due to this, it
affects international payment and the price of
goods, affecting the economy.
#3 -Tax Rate
• The tax rate is a crucial part of the economy.
The tax rate affects the price of goods and
their sales, affecting the economy.
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ECONOMIC FACTORS AFFECTING BUSINESS
#4 – Inflation
• The increase in the demand price of goods or
services increases inflation and money supply.
#5 – Labor
• Labour and cost or wage are always the
important economic factors affecting the
economy. As a result, many countries have
started outsourcing labor from other countries.
The company begins its plant or production
where labor is cheap.
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ECONOMIC FACTORS AFFECTING BUSINESS
#6 – Demand / Supply
• Demand or supply of goods or services affects the
economy as with the increase in demand price of goods
or service increase, which results in inflation. With
inflation, the money reserve in the economy increases
with the rise in the supply of goods or services. The
price of the same decreases. Demand and supply
depend on each other.
#7 – Wages
• Wages paid to labor or employee are a direct cost to
the company added to the cost of goods or services
through which it affects the economy. Another way
wages affect the economy is by increasing wages,
consuming power, and improving consumer spending.
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ECONOMIC FACTORS AFFECTING BUSINESS
#8 – Law and Policies
• With change or modification in the law, the economy of
the country changes. For example, if the government
makes a law that should ban liquor in the country, it will
affect companies dealing with it, their employees, and
shopkeepers, which affects the economy at a broad
level. Similarly, any policy made by the government will
affect the economy.
#9 – Government Activity
• Government activity also affects the economy. So, for
example, if the government promotes any industry like
insurance or medical or technology, it will encourage
that sector that boosts its economy, overall supporting
it.
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ECONOMIC FACTORS AFFECTING BUSINESS
#10 – Recession
• Recession affects consumers’ purchasing
power, forcing companies to drop their goods
or services.
• So, we can see how the above economic
factors affect the economy.
• Many other economic factors like
unemployment, market, land, capital, science,
and technology affect the economy. However,
for the proper functioning of the country, the
economy needs to be stable. At a macro level,
one can see that with regular business with
competitive earnings.
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