Environment economists perform studies to determine the theoretical or empirical effects of environmental policies on the economy. Economic Environment is the economic factors that have effects on the working of the business. It includes system, policies and nature of an economy, trade cycles, economic resources, level of income, distribution of income and wealth. It is very dynamic and complex in nature and does not remain the same.
Economic activity follows an irregular pattern which is known as the business cycle. The cycle affects all the economies over time. The pattern has strong economic growth and even periods where economic growth falls. The level of economic activity changes within the UK depending on factors such as business investment, government policies etc. GDP measures the level of economic activity. The main reason is that in our society the environment has become a scarce resource. Since economics is about how to deal with scarce resources, it can often be useful when tackling environmental problems.
One way of using economics is to ensure that the costs and the benefits of environmental measures are well balanced. Although it is difficult to estimate costs and benefits, there is an increasing demand that this is done before environmental policy is decided on a European level. With the use of market-based instruments, environmental goals can sometimes be reached more efficiently than with traditional command and control regulations.
GDP (Gross Domestic Products)
The GDP stands for Gross Domestic Product which is the value of all the goods and services produced in an economy over a period of time. When there is an increase in GDP, economic growth occurs. However, if the GDP falls, negative growth is occurring.
Boom is a period of rapid economic expansion resulting in higher GDP, lower unemployment and rising asset prices. During a boom, there are high levels of economic growth so businesses tend to increase their investment during this phase and many new businesses start up as well. The only disadvantage is that there may be an increase in inflation as prices rise in response to more demand and the boom period does not last forever as it becomes difficult to sustain growth. The demand for good would be high so it beats the ability of all businesses to supply all the goods that consumers would like which means the businesses won’t be able to supply goods because of high demand. Boom has few characteristics which are as follows;
High levels of demand which leads to higher prices
High capacity utilisation
High employment levels
Businesses invest and expand
Many business start –ups
Recession is when there is lower demand of goods and services which leads to a rise in unemployment. Recession occurs when the growth of economic activity reaches a point after which it begins to slow down, when the boom is followed by a downturn. The economy experiences negative economic growth as GDP begins to fall. The recession period is always a disadvantage for businesses like Sainsbury’s because people don’t buy their product as the prices go high. This leads businesses to lower the price of the products to increase their chance of making sales. Many businesses would be affected by the recession period in the UK because they need to purchase stocks in order to make sales but they don’t have enough money during the recession. This leads to the business not having any products to sell to their customers.
Here are some of the characteristics of Recession;
Business confidence falls
Another business cycle is the depression period as it is the worst economic activity in the business cycle. Depressed economic conditions mean that the profits of banks decline. During this difficult time, building societies work hard to support their members because