CBSE Class 12 Business Studies Business Environment Worksheet Set B

MCQs for NCERT Class 12 Business Studies Business Environment

Question. With which of the following the Indian Companies have to compete?
(a) New and Old Indian Companies
(b) Multinational Companies
(c) Imports
(d) All the above.

Answer : D

Question. As a result of the Economic Reforms the Seller Market has been replaced by ________ .
(a) Buyer Market
(b) Foreign Market
(c) Whole-sale Market
(d) Retail Market

Answer : A

Question. Which of the following is included in the Micro Environment (Operating Environment)?
(a) Suppliers
(b) Competitor
(c) Suppliers and Competitor
(d) Economic Environment

Answer : C

Question. Which factor is not included in Internal Environment?
(a) Objective
(b) Policies
(c) Public
(d) Production-Method

Answer : C

Question. Which of the following is available in time with the help of the study of environment?
(a) Government Help
(b) Foreign Aid
(c) Warning Signal
(d) Material

Answer : C

Question. Under ________ the Reserve Bank keeps control on the money supply in order to achieve the objectives of the general economic policy.
(a) Fiscal Policy
(b) Monetary Policy
(c) Trade Policy
(d) Industrial Policy

Answer : B

Question. Which factor is not included in Macro Environment?
(a) Economic Environment
(b) Competitors
(c) Social Environment
(d) Political Environment 

Answer : B

Question. Which element of business environment is shaped by beliefs and customs of people?
(a) Legal Environment
(b) Economic Environment
(c) Social Environment
(d) Political Environment

Answer : C

Question. Which of the following is not a benefit of demonetization in India?
(a) Control over corruption
(b) counterfeiting the use of high denomination notes for illegal activities
(c) Control on black money
(d) More demanding customers

Answer : D

Question. Statutory warning of Cigarette smoking is injurious to health on the cigarette packet is an example of
(a) Legal Environment
(b) Economic Environment
(c) Social Environment
(d) Political Environment

Answer : A

Question. Which of the following is a component of economic environment?
(a) Concern with quality life
(b) Rates of saving and investment.
(c) Extent of government intervention in business.
(d) Birth and Death rates.

Answer : B

Question. Increasing trend towards E-Commerce is an example of
(a) Economic Environment
(b) Legal Environment
(c) Social Environment
(d) Technological Environment

Answer : D

Question. Scanning of the business environment helps to identify
(a) Opportunities
(b) Threats
(c) Both (a) and (b)
(d) None of the above.

Answer : C

Question. ‘Infosys decides to open schools for lesser privileged children’ is an example of ________.
(a) Economic
(b) Political
(c) Legal
(d) Social

Answer : D

Question. When did the government of India made an announcement regarding demonetisation of ` 500’ and ‘1,000 ‘currency notes?
(a) November 8, 2016
(b) November 9, 2016
(c) November 7, 2016
(d) November 5, 2016

Answer : A

Question. Which of the following is not an element component of social environment?
(a) Birth and Death rates.
(b) Constitution of the country.
(c) Population shifts.
(d) Life expectancy.

Answer : B

Question. Which of the following has got the First Mover Advantage?
(a) Asian Paints
(b) Nerolac
(c) Kansai Paints
(d) Maruti Udyog

Answer : D

Question. ‘Beti Bacho Beti Padho Yojana’ started by the government of India is a part of _______
(a) Economic Environment
(b) Political Environment.
(c) Social Environment
(d) Technological Environment

Answer : B

Question. Introduction of mobile phone have negatively affected the business of watches and cameras" Which factor of business environment is related with the sentence.
(a) Technological environment
(b) Social environment.
(c) Political environment
(d) Legal environment

Answer : A

Question. ‘The increase in the demand for many Ayurvedic medicines, Health products and services in the past few months, is related to the need for building immunity and an increased awareness for heath care due to the spread of Corona virus’. Identify the feature of business environment being discussed above.
(a) Specific and general forces
(b) Interrelatedness
(c) Relativity
(d) None of the above.

Answer : B

Question. In order to solve economic problem of our country, the government took several steps including control by the state of certain industries, central planning and reduced importance of the private sector. Which dimension of business environment is discussed here?
(a) Economic environment.
(b) Political environment
(c) Both (a) and (b)
(d) Legal environment

Answer : C

True or False :

1. Liberalization means reduced government controls and restrictions. ( True )

2. By developing new ways of doing things the firm can cope up with changing technological environment. ( True ) 

3. Technological improvement shifts in customer preferences or entry of new competition in the market is an example of uncertainty. ( False )

4. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors. ( True ) 

5. Threats refer to the internal environment trends and changes that will hinder a firm’s performance. ( False ) 

6. Demonetization is not a tax administration measure. ( False ) 

7. Understanding of business environment may assist an enterprise in planning and policy formulation. ( True ) 

8. Changes in fashion and taste of consumers may not have impact on the demand in the market. ( False ) 

9. Business environment is uncertain as it is very difficult to predict future. ( True ) 

10. The future of an enterprise is closely bound up with what is happening in the environment. ( True ) 

11. New Economic Policy was introduced in India in 1991. (True) 

12. Globalization means integration of Indian Economy with the Economy of America (False) 

13. Disinvestment means investment in different sector (False) 

14. Liberalization was introduced to free Indian Economy from unnecessary control and restrictions (True) 

15. Indian Government is giving freedom of Fixing Price to oil companies is an indication of Liberalized Economy. (True) 

16. Railway is open for private sector participation (False) 

17. After Introduction of N.E.P companies become market oriented (True) 

18. When a company takeover another company and clearly become new owner the called is called Acquisition (True) 

19. When two or more companies join together to share their resources and carry out an economic activity it is known as merger ( True) 

20. Impact of N.E.P has been positive on Indian Economy (True) 

Very Short Answer Type Questions

Question. List two examples of change in social environment which affects business organisation.
Answer : Customs and belief of people; education system

Question. Teaching learning process through google meet and google classroom is related to which dimension of business environment?
Answer : Technological

Question. Why is it said that business enterprise is influenced by its environment?
Answer : Success of an enterprise will depend upon how well the environmental forces are understood-
1)To identify opportunities
2)To identify threats
3)To cope with changes
4)To formulate plans and policies
5)To tap useful resources.

Question. Now the firms have to study and analyse the market first and produce goods accordingly. Which impact of government policy changes is mentioned here?
a) Demanding customers b) Increased competition c) market orientation
Answer : Market orientation

Question. The conditions in environment keeps changing because –
Answer : Environment is dynamic.

Question. The repo rate decreased by 25 points. It is an element of which dimension of business environment?
Answer : Economic

Question. Under which dimension does change in taste, fashion and trend fall?
Answer : Social environment.

Business Environment

Meaning - The sum total of individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.
The economic, social, political, technological and other forces which operate outside a business enterprise are part of its environment. Similarly, individual consumers, competing enterprises, government, consumer groups, competitors, courts, media and other institutions working outside an enterprise also constitute its environment. All these forces are likely to influence the performance of a business although they happen to exist outside its boundaries.

Features of Business Environment-
D-Dynamic Nature
I-Inter-relatedness
S-Specific and general forces
T-Totality of external forces
U-Uncertainty
R-Relativity
C-Complexity
Totality of External Forces : Business Environment is the sum total of all external forces that directly or indirectly influences the working of a business system.

• Specific and General Forces : Business environment includes both specific and general forces.

a) Specific forces: (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working.

b) General Forces: ( such as social, political, legal and technological conditions) indirectly affect the business enterprises.

• Inter-relatedness : The different elements of business environment are closely inter-related.
For example, increased awareness for health care has raised the demand for organic food and roasted snacks.

• Dynamic Nature: The business environment is dynamic in nature, i.e, it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market.
For example, changes like invention of new techniques of production, a new minister in the Government, changes in industrial policy etc.

• Uncertainty: Business Environment is largely uncertain as it is very difficult to predict future happenings, especially when environment is changing too frequently like in case of information technology or fashion industries.
For example, it is very difficult for a garment manufacturing company to predict the frequently changing fashion.

• Complexity: Business Environment consists of numerous interrelated and dynamic forces which arises from different sources. So it becomes difficult to understand what exactly constitutes a given environment.
For example, it may be difficult to determine the extent of relative influence of social, economic, political, technological or legal factors on change in demand of a product in the market.

• Relativity: Business Environment is a relative concept since it differs from country to country and even region to region. For instance, political conditions in USA differ from those in China or Pakistan. Similarly, demand for sarees is fairly high in India, while it is very low or almost non-existent in USA or France.

Importance of business environment-

1.It enables the firm to identify opportunities and getting the first mover advantage: Opportunity refers to the positive external trends or changes that will help a firm to improve its performance.
For example, Maruti Udyog became the leader in small car market because it was the first to recognise the need for small car.

2.Helps the firm to identify threats and early warning signals: Threats refer to external environment trends and changes that will hinder a firm’s performance.
For example, if an Indian firm finds that a MNC is entering the Indian market with new substitutes, it should act as a warning signal and the firm must prepare to meet the threat by adopting measures like improving quality, reducing cost, engaging in aggressive advertising, and so on.

3.Helps in tapping useful resources: Environment is a source of various resources for running a business. A business enterprises gets various resources or inputs like finance, machines, raw material, power etc, from its environment including financiers, government and suppliers.
For example, with rise in demand for LED monitors, companies started arranging raw materials for LED instead of CRT monitors.

4.Helps in coping with rapid changes : The business environment is getting increasingly dynamic where changes are taking place at a fast pace.
For example, management of google is continuously busy in adding new features in its search engine to remain ahead of changes made by other competing search engines.

5.Helps in assisting in planning and policy formulation: Environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis provide the base for planning.
For example, ITC Hotels planned for new hotels in India after observing the increase in India’s share of world tourism.

6.Helps in improving performance: Analysis and understanding of trends of the business environment helps the business to improve its performance.

Elements or Dimensions of Business Environment

S- Social Environment :The social environment of business includes the social forces like customs and traditions, values, social trends, society‘s expectations from business etc. Traditions define social practices that have lasted for centuries.
For Example :- Diwali, Id, Christmas and Guru Parv in India.

T- Technological Environment:Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
For Example: - Recent technological, advances in computers and electronics have modified the ways in which companies advertise their product.

E-Economic Environment : Interest rates, inflation rates, change in income of the people, stock market and the value of rupee are some of the economic factors that can affect management practices in a business enterprise.

P-Political Environment: Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.

L-Legal Environment: Legal environment includes various legislations passed by the government administrative orders issued by government authorities, court judgments as well as the decisions rendered by the various commissions and agencies at every level of the government centre, state or local.

Demonetisation: It is the act of removing a currency unit of its status as Legal Tender.
The Government of India, made an announcement on November 8, 2016 with profound implications for the Indian economy. Rs.500 and Rs.1000 denomination notes were withdrawn from circulation. The aim of demonetisation was to curb corruption, counterfeiting the use of high denomination notes for illegal activities; and especially the accumulation of ‘black money’ generated by income that has not been declared to the tax authorities.

Features
1. Demonetisation as a tax administration measure.
2. Non tolerance of tax evasion.
3. Demonetisation also led to tax administration channelizing savings into the formal financial system.
4. Demonetization is to create a less-cash or cash-lite economy.

MCQs for NCERT Class 12 Business Studies Business Environment

Question. Under Industrial Policy the role of ________ has been decided.
(a) Public Sector
(b) Private Sector
(c) Public Sector and Private Sector
(d) Government

Answer : C

Question. Which of the following is not a part of the internal environment?
(a) Customers
(b) Objectives
(c) Policies
(d) Organisation Structure

Answer : A

Question. Price control means that the companies will sell goods on the ________ price.
(a) Government
(b) Market
(c) Printed
(d) Voluntary

Answer : A

Question. Under which environmental effect, IBM and Coca-Cola had to leave India?
(a) Political
(b) Social
(c) Economic
(d) Technical

Answer : A

Question. Which of the following best indicates the importance of business environment?
(a) Identification
(b) Improvement in performance
(c) Coping with rapid changes
(d) All of them

Answer : D

Question. Which of the following is a factor of the social environment of business?
(a) Customs
(b) Level /Standard of Education
(c) Rate of Interest
(d) All the above

Answer : D

Question. Which of the following has got the First Mover Advantage?
(a) Asian Paints
(b) Goodlass Nerolac
(c) Kansai Paints
(d) Maruti Udyog

Answer : B  

Question The laws of mining rules and regulations licence required for running the business is an example of.
(a) Economic environment
(b) political environment
(c) social environment
(d) legal environment 

Answer :  D

Question. Increase or decrease in the value of rupee is an example of ________. 
(a) Political Environment
(b) Economic Environment
(c) Social Environment
(d) legal Environment 

Answer :  B

Question which one is specific Force for a garmentmanufacturing industry?
(a) Change in law
(b) change in government
(c) change in fashion
(d) change in technology 

Answer : C

Question. Technological improvement and innovations results in _____.
(a) Increase in Tax
(b) Reduction in profit margin
(c) Render existing production obsolete
(d) More demanding customers 

Answer : B

Question. Which of the following creates fear in the mind of investors?
(a) Political uncertainty
(b) Technological improvement
(c) New innovations
(d) Change in taste and preference of customers

Answer : A

Question. What will be the affect of increase in tax by government?
(a) Increase in cost of production
(b) Increase in profit margin
(c) Creates fear in the mind of investors
(d) Increase in competition

Answer : A

Question"Introduction of mobile phone have negatively affected the business of watches and cameras" Which factor of business environment is related with the sentence.
(a) social environment
(b) Technological environment
(c) Political environment
(d) Legal environment 

Answer : B

Question"Now adays consumers are we health-conscious which is giving rise to increase demand of Organic products," Which factor of business environment is highlight in above statement.
(a) legal environment
(b) Political environment
(c) economic environment
(d) social environment

Answer : D

Question"Nowadays Womens are very health conscious which is is witches giving rise to to increase demand of of Organic products" This statement is related with the factor of of business environment is
(a) Political environment
(b) legal environment
(c) social environment
(d) Technological environment 

Answer : C

Question. Which one of the following is not a feature of business environment?
(a) Uncertainty
(b) Interdependence
(c) Complexity
(d) Stability

Answer : D

Question. Since more number of people have become more beauty and health conscious, our economy has witnessed an unprecedented surge in the number of health and beauty spas and wellness clinics. Related feature of business environment being described in the above lines is —
(a) Totality of external forces
(b) Dynamic nature
(c) Interrelatedness
(d) Relativity

Answer : C

Question. The Reserve Bank of India reduces CRR (Cash Reserve Ratio) by 0.5% to control recession. This is related to which dimension of Business Environment.
(a) Political Environment
(b) Economic Environment
(c) Social Environment
(d) Legal Environment

Answer : B

Question. With the introduction of Photostat Machines in the market, the carbon paper industry was adversely affected. Which component of environment was responsible for it?
(a) Economic
(b) Political
(c) Technical
(d) All the above

Answer : C

Question. Introduction of mobile phone have negatively affected the business of watches and cameras "Which factor of business environment is related with the sentence.
(a) Social environment
(b)Technological environment
(c) Political environment
(d) Legal environment 

Answer : B

Question. ______________________ is considered a major element of the political environment:
(a) The extent and nature of government intervention in business;
(b) planned outlay in public and private sectors;
(c) Expectations from the workforce;
(d) Administrative order issued by government authorities.

Answer : A

Question. Which of the following is available in time with the help of the study of environment?
(a) Government Help
(b) Foreign Aid
(c) Warning Signal
(d) Material

Answer : C

Question. All the forces of Business Environment are_______________
(a) Relativity
(b) Inter related
(c) Uncertain
(d) None of the above

Answer : B

True/False :

Question. Dynamic nature of business environment suggests that it is pervasive.

Answer : False

Question. Investors and customers are the two components of specific forces of business environment.

Answer : True

Fill in the Blanks

Question. Liberalisation refers to end of licence quota and many more restrictions.

Question. Freedom in fixing the prices of goods and services is part of Liberalisation

Question. Privatisation refers to giving greater role to private sector and reducing the role of public sector.

Question. Globalisation refers to integration of various economies of world.

Question. The main aim of demonetisation was to curb Corruption.

Question. The first response seen after New Economic Policy is companies are going for Diversification or Export.

Question. After New Economic Policy firms shifted from selling concept to Marketing concept.

Question. The business environment has Relative’ impact on different Business Enterprise.

Question. All the forces of Business Environment are Inter-related.

Question. Maruti Company was the first company to understand the need of middle class people and launched the small car concept and availed First Mover advantage.

Important Questions for NCERT Class 12 Business Studies Business Environment 

Short Answer Type Questions :

Question. 'Konark Ltd.' is an electronic goods manufacturing enterprise situated in Shivpuri, Madhya Pradesh. It is earning a very low revenue in comparison to a competing electronic goods manufacturing enterprise, 'Nova Ltd.' situated in Mumbai. Both Konark's and Nova's operations are affected directly by the investors, customers, competitors and suppliers, which are unique to their respective locations. In addition to this, individual firms of this field are affected indirectly by the factors like the money supply in the economy, composition of the families, the technological changes, etc.
(a) Identify and state the feature of the concept discussed in the above paragraph.
(b) Also, state any four points of importance of this concept. 
Answer: ​​​​​​ a. Business Environment
b. write any four features of business environment

Question. Ultra Paint Co. which is manufacturing paints has been enjoying a prominent market position as it manufactured best quality paints, made timely payment of taxes to government. It assembled various inputs like finance, machines, raw materials, etc. from its environment. But since last year it has been dumping its untreated poisonous waste on the river bank which has created many health problems for the people. As a result, the court passed an order to seal the manufactu-ring unit of the company.
1. State the importance of business environment highlighted quoting the line from the above case.
2. Identify any two dimensions of business environment mentioned in the above case by quoting lines from it.
Answer: 1) (a) Business environment helps in tapping useful resources.
“It assembled various inputs like finance, machines, raw materials, etc. from its environment.”
(b) (i) Social environment
“…it has been dumping its untreated poisonous waste on the river bank which has created many health problems for the people.”
2) Legal environment- “…the court passed an order to seal the manufacturing unit of the company.”

Question. A recent rate cut in the interest on loans announced by the Banks encouraged Amit, a science student of Progressive School to take a loan from State Bank of India to experiment and develop cars to be powered by fuel produced from garbage. He developed such a car and exhibited it in the Science Fair organised by Directorate of Education. He was awarded first prize for his invention. Identify and explain the dimensions of business environment discussed in the above case. 
Answer: (i) Economic Environment- Reference line "A recent cut in the interest on loans announced by banks.
(ii) Technological Environment- Reference line: "Developed cars to be powered by fuel produced from garbage". 

Question. As per the directions issued by the Supreme Court, the government passed an order to ban the sale of tobacco products within the area of 200 meters of all educational institutions as:
1. Its consumptions injurious to health.
2. People are becoming more conscious about health and fitness. This indicates the government’s attitude towards this business.
Identify the business environment under three different dimensions by quoting from above paragraph. 
Answer: The various dimensions of business environment being referred to the in the above case are as follows:
1. Legal Environment: “As per the directions issued by the Supreme Court.”
2. Political Environment: “The government passed an order to ban the sale of tobacco products within the area of 200 meters of all educational institutions.”
3. Social Environment: “Its consumption is injurious to health and people are becoming more conscious about health and fitness.”

Question. Over the years, e-business in our country has witnessed tremendous growth due to several reasons. There is significant improvement in the Information Technology infrastructure over the last decade as the Government has taken important steps in high-speed Internet connectivity. As a result, the broadband networks have not only become better but also more affordable. Additionally, Government is trying to make rural India connected through broadband – a great possibility for e-business to expand the retail market by reaching out to the most remote rural customer. Another catalyst strengthening the e-business segment is the country’s favourable demography. It has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in the year 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan, this promises for phenomenal increase in e-business. Moreover, the penetration of the smartphone in a large section of the population has aptly addressed the problem of compute illiteracy. Not with standing the fact that consumers also prefer e-business due to multiple factors like convenience, time etc. Identify and explain the various dimensions of business environment being referred to in the above case. 
Answer: The various dimensions of business environment being referred to in the above case are as follows:
1. Political Environment:
2. Technological Environment:
3. Social Environment:

Question. With changes in the consumption habits of people, Neelesh, who was running a sweet shop, shifted to the chocolate business. On the eve of Diwali, he offered chocolates in attractive packages at reasonable prices. He anticipated huge demand and created a website chocolove.com for taking orders online. He got a lot of orders online and earned huge profits by selling the chocolate. Identify and explain the dimensions of business environment discussed in the above case. 
Answer: The various dimensions of business environment being referred to in the above cased are as follows:
1. Social environment:
2. Technological environment:

Question. Eco-friendly products are gaining power as the consumers‟ awareness about environmental issues has increased over the years and they are conscious about choosing products that do not have adverse effects on the environment. They are now more conscious about the carbon emission and climate change effects, and want themselves to be „seen‟ as a green advocate among their peers. In such a scenario, it has become a challenge for the companies as they have to not only meet the needs of the consumers but also ensure that their products are safe and environment friendly. At a result, there is growing need for better and advanced technologies to works as a catalyst in this regard.
1. Identify the relevant feature of business environment being discussed above.
2. Describe briefly any three points which highlight the importance of business environment and its understanding by managers. 
Answer: 1. Inter-relatedness is the relevant feature of business environment which is being discussed above.
2. The three points which highlighted the importance of business environment and its understanding by managers are described below:
1. It enables the firm to identify opportunities and getting the first mover advantage: The dynamic business environment provides numerous opportunities for a business to evolve as per the changing needs. Therefore, early identification of the forthcoming opportunities helps an enterprise to be the first to exploit them instead of losing them to the competitors.
2. It helps the firm to identify threats and early warning signals: sometimes the changes in the external environment may pose as a threat and hinder a firm‟s performance. An awareness about the business environment helps the managers to identify such threats on time and take necessary decisions and action.
3. It helps in tapping useful resources as the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires.

Question. Disco Ltd. manufactures fashionable and designer clothes. Recently it finds that the demand for its products has been declining. After market research it was discovered that fashion and tastes of the consumers is changing at a fast pace. Customers‟ demand is increasing. New competitors have entered the market with new designs. It is very difficult for the company to predict future happenings. Also, it is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on decrease in demand of its products in the market.
A meeting was held in which managers from different functional levels heading Production, Marketing, Finance, etc., for example, Chief Operating Officer, Chief Finance Officer, Vice President (Marketing) were present to discuss how to deal with the situation. After a long discussion, it was decided that they would study and analyze the market first to identify customer tastes and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising, after-sales services, etc.
1. Identify any two features of business environment by quoting the lines from the above case.
2. At which level of management the meeting of managers of Disco Ltd. was held?
3. State the importance of understanding of environment by business managers in the light of the above para. 
Answer: 1. Features of business environment: 
a. Dynamic nature: “fashion and taste of the consumers is changing at a fast pace.”
b. Uncertainty: “It is very difficult for the company to predict future happening.”
c. Complexity: It is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factors on decrease in demand of its products in the market.
2. Top level management 
3. Business environment helps the manager in coping with rapid changes.

Question. Difference between economic & non – economic environment.
Answer: The economic environment consist of factor like the fiscal policy, the monetary policy , the industrial policy, the pace of the economic development etc. The non-economic environment refer to social, cultural, political, legal, technological factor etc.

Question. What is truly globalised economy?
Answer: A truly global economy implies a boundary less world where there is. 
i) Free flow of goods and services across nations.
ii) Free flow of capital across nations.
iii) Free flow of information and technology.
iv) Free movement of people across border.
v) A global governance perspective.

Question. What is “liberalisation”? In which areas have liberalisation taken place.
Answer: Liberalization of economy means. to free it from direct or physical control imposed by the government. In other words, it is the process by which government control over the industry is being loosened. It implies liberating the trade and industry from unwanted government control and restriction. Liberalization of the Indian industry has taken place with respect to:-
a) Abolishing licensing requirements in most of the industries except a short list.
b) Freedom in deciding the scale of business activities.
c) Freedom in fixing the prices of goods services.
d) Removal of restriction on the movement of good and services.

Question. A recent rate cut in the interest on loans announced by the banks encouraged Amit, a science student of Progressive School, to take a loan from State Bank of India to experiment and develop cars to be powered by fuel produced form garbage. He developed such a car and exhibited it in the Science Fair organized by the Directorate of Education. He was awarded the first prize for his invention. Identify and explain the dimensions of business environment discussed in the above case.
Answer: The various dimensions of business environment being referred to in the above case are as follows:
1. Economic Environment:
2. Technological Environment:

Question. What is economic environment? State the component of economic environment?
Answer: Economic environment consist of Grosse national product corporate profits, inflation rate productivity, employment rates, interest rates, debt and spending economic environment has stronger influence over organization policies and action.
Components of economic environment are as followsa) Rates of saving and export of different items.
b) Volume of import and export of different items.
c) Money supply in the economic.
d) Public debt.
e) Agricultural & industrial product.

Question. “Business environment is a relative concept.” Comment .
Answer: Business environment is a relative concept since it differ from country to country and even region political condition in the USA, for instance differ from those in china or Pakistan . Similarly demand for sarees may be fairly high in India whereas it may be almost non existent in france.

Long Answer Type Questions

Question. Explain the features of business environment.
Answer: Feature of business, environment are as follows
1 Totality of external forces:-All forces that are external to the business aggregate constitute the business environment.
2 Specific and general forces :-Business environment includes both specific and general forces which may affect the business firms either directly or indirectly specific factor includes investor, customer ,supplier etc and these influence individual enterprises directly on the other hand, general forces such as legal , social , governmental, Technological factor affect all business indirectly.
3. Interrelatedness:- The difference external & internal element of business environment are closely interrelated . eg. Publishers of newspaper & popular magazine increase their features , quality of printing & article because of environment variable such as reader’s preference.
4. Dynamic Nature :- Business environment is dynamic in that it keeps on changing whether in terms of technological Improvement, shifts in consumers demand and changes in economic policy etc.
5. Uncertainty:- Business environment is largely uncertain as it is very difficult to predict future happenings, especially when environment changing are taking place too frequently as in case of information technology of fashion industries.

Question. Explain the importance of Business Environment.
Answer: The importance of Business Environment are as follows:-
1. Enabling the identification of opportunities and getting the firsts mover Advantage:-
Environment can help the firm to capitalize on early opportunities rather than lose these to competitors
2. Help in the identification of threats and early warning signals:-
Threats refer to the changes in external environment that will have an adverse effect on the firm’s performance. A business environment enables manages to identity the various threats and serve as an early warning signals.
3. Sensitise the management\coping with the rapid changes:-
Environment understanding sensitise the Mgt. to the changing needs & wishes of its customers & develop suitable causes of action.
4. It helps in tapping useful resource:-
He original receive input-finance, material members etc. from the external environment. The organization is depend of product & services to a wide range of customers. This can be done better by understanding to the business environment.
5. It helps in assisting in planning and policy formulation:-
Environment understanding provides a base of the object qualitative information about the business environment. That strategy can utilize.

Question. Explain the impact of environment policy changes on business and industry.
Answer: The impact of changes in government policy on business and industry are as follows:-
1. Increasing competition:- As a result of changes in rules of industrial licensing and entry of foreign terms competition for Indian terms has increase specially in service industries like telecommunication air lines banking etc. which were earlier in the public sector.
2. More demanding customers:- Customs today have become more demanding because they are well informed. Increased comptetions in the market gives the customers wide choices in purchasing, better quality of goods and services.
3. Necessity for changes: - The changes in policy after 1991 has forced the enterprises to continuously modify there operation because of the turbulent market forces.
4. Need for developing human resources: - With the ever changing market condition has forced the enterprises to develop their human resources. The enterprises had to know people who are competent & committed to their work.
5. Market orientation: - With the ever changes market condition enterprises. These days have to first study the market & accordingly produce and supply goods.

MCQs for NCERT Class 12 Business Studies Business Environment 

Question. Which of the following is included in the Economic Environment?
(a) Economic System
(b) Economic Policies
(c) Economic Conditions
(d) All the above

Answer : D

Question. Determination of the economic policies is for the purpose of regulating ________ .
(a) Political Environment
(b) Social Environment
(c) Legal Regulatory Environment
(d) Economic Activities

Answer : D

Question. Which of the following does not explain the impact of Government policy changes on business and industry?
(a) More demanding customers
(b) Increasing competition
(c) Change in agricultural prices
(d) Market orientation

Answer : C

Question. Which of the following deals with the process of simplification of Import-Export?
(a) Liberalisation
(b) Privatisation
(c) Liberalisation and Privatisation
(d) Globalisation

Answer : A

Question. The entry of the multinational companies in large numbers in the Indian market has created ________ .
(a) Huge Demand
(b) Huge Supply
(c) Tough Competition
(d) Huge Demand and Supply

Answer : C

Question. Since more people have become more beauty and health conscious, our economy has witnessed an unprecedented surge in the number of health and beauty spas and wellness clinics. Related feature of the business environment being described in the above lines is ___________.
(a) Totality of External forces
(b) Dynamic
(c) Interrelatedness
(d) Relativity

Answer : C

Question. Hindustan Unilever Ltd launched fairness cream, fair and lovely in 1975 which was gender neutral. Later it launched ‘glow and lovely’ and ‘glow and handsome’ for females and males respectively. It was hit by a trademark hurdle with its rival Emami which claimed that it was an unfair business practice to use a similar name with Emami glow and handsome. Which component of the business environment does it relate to?
(a) Legal environment.
(b) Social environment.
(c) Technological environment.
(d) Political environment

Answer : A

Question. The purpose of introduction of GST was to introduce one nation and one tax, was to ease the taxation system of the economy, ease in doing business and removal of multiple taxes. Which components of the business environment are involved in the implementation of GST?
(a) Legal and political.
(b) Political and economic.
(c) Economic and legal.
(d) Social and legal.

Answer : C

Question. According to the United Nations Environmental Agency, the world produces around 300 million tons of plastic each year, half of which constitutes single-use items. Ford is recycling over one billion plastic bottles every year to develop elements of the car’s interior, reducing the amount of plastic ending up in a landfill. The American car maker has revealed that their Romanian-built EcoSport SUVs’ carpets are made using 470 recycled single-use plastic bottles. The process for making Ford EcoSport carpets involves shredding bottles and their caps into tiny flakes and then heating them to 260° C. Identify the related dimension of the business environment.
(a) Economic
(b) Social
(c) Technological
(d) Political

Answer : C

Question. Which of the following is an example of an economic environment?
(a) Demand for automatic machines and luxury items in middle class families.
(b) Permission to the private sector for entering into the financial sector.
(c) Replacement of traditional watches with digital watches.
(d) Delicensing policy of industries.

Answer : A

Question. Electric vehicles with zero tailpipe emission are emerging as a good alternative to the problems like climate change, surging pollution leading to ill health, crude import bill and energy security. Identify the related dimensions of the business environment.
(a) Economic, legal , social
(b) Social , Political and Economic
(c) Economic, technological and social
(d) Social, Political and legal

Answer: C

Question. Assertion (A) : Suppliers affect any business directly but the political environment affects it indirectly. Reason (R) : Business environment is a relative term . It differs from country to country and region to region .
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

Answer: B

Question. Twinkle Stars’ is a well-known resort for organising parties, especially for children. However, in the past 6 months its popularity has reduced considerably as a new resort with better ambience and facilities has opened within its vicinity. Name the related feature of the business environment which has influenced the business of ‘Twinkle Stars’ adversely.
(a) Totality of external forces
(b) Dynamic
(c) Inter-relatedness
(d) Uncertainty

Answer: B

Question. Assertion : Entry of new players in the market may make an enterprise think afresh about how to deal with the situations.
Reason : Business environment assists in planning and policy formulation.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

Answer: A

Question. Match the column with respective features .
1. Dynamic A. Easier to understand in parts but difficult to grasp in totality
2. Uncertainty. B. Different political conditions in different nations
3. Complexity. C. Difficult to predict the future events
4. Relativity. D. Technological improvements. Find the correct option
(a) 1-D, 2-C, 3-A ,4-B
(b) 1-D , 2-C, 3-B ,4-A
(c) 1-C, 2-D , 3-A , 4-B
(d) 1-A, 2-B , 3-C , 4-D

Answer : A

Question.Yo Tummy’ began its business by offering the classic combo of hamburgers and fries. But over time, their customers wanted healthier foods, so ‘Yo Tummy’ responded and began offering healthy alternatives such as salads, fruits, wraps and oatmeal. If ‘Yo Tummy’ hadn’t responded, they may have lost customers that wanted to eat healthier foods. The above case highlights one of the points related to the importance of the business environment and its understanding by managers. Identify it.
(a) It helps in coping with rapid changes .
(b) It helps in improving performance.
(c) It helps in identifying threats and getting early warning signals.
(d) It helps in identifying opportunities and getting first mover advantage

Answer : A

Question. Assertion (A) : Agricultural and industrial production trends affect the business environment.
Reason (R): Technological environment like agriculture and industrial production trends have modified the ways to produce and distribute goods through improved methods and techniques.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

Answer: C

Question. “Sudden announcement of lockdown in the entire country by our Prime Minister” is an example of which feature of the business environment?
(a) Relativity.
(b) Specific and general forces.
(c) Uncertainty.
(d) Inter-relatedness.

Answer: C

Question. During the period of COVID-19 the cinema halls even after reopening really faced a lot of loss in revenue. Which dimension of the business environment is responsible for the loss in revenue?
(a) Legal environment.
(b) Social environment.
(c) Technological environment.
(d) Political environment.

Answer : B

Question. Seeing the surge in demand of sanitisers, several Indian companies were found supplying sanitisers without GST. Which component of the business environment does this relate to?
(a) Legal Environment.
(b) Social environment.
(c) Technological environment.
(d) Economic environment.

Answer : D

Question. Which of the following is an example of a political environment?
(a) India is signing double taxation avoidance agreements with a number of countries.
(b) Good educational institutions are in great demand.
(c) Rates of saving in India are high as compared to other countries.
(d) New models of mobile phones are rich in features.

Answer : A

Question. ________ is included in Economic Environment.
(a) Economic System
(b) Economic Policies
(c) Economic Conditions
(d) All of the above

Answer : D

Fill in the blanks

Question. The totality of all individuals, institutions and other forces that are outside the business is considered as ............ . 
Answer: Business environment

Question. Business environment includes ....... and ................
Answer: specific , general forces. 

Question. Business environment is the sum total of all the factors and forces .............. to a business.
Answer: external 

Question. Different elements of parts of a business environment are closely ..................
Answer: interrelated. 

Question. Frequent environmental changes in the field of technology and fashion industry is related with .......... of business environment.
Answer: uncertainty

Question. Understanding of business environment helps the firm to identify opportunities to get the ....................
Answer: first mover advantage. 

Question. Environment is a .......................that is relatively easier to understand in parts but difficult to grasp in its totality. 
Answer: complex phenomenon 

Question. Celebration of Diwali is the example of .................
Answer: Social Environment. 

Question. The trend of health and fitness has created a demand for products like gyms, bottled mineral water and food supplement etc. these are the examples of ...............Environment.
Answer:  Social 

Question. Main components of New Economic policy are Liberalization, globalization and .....................
Answer: Privatization. 

Question. End of license quota, and reduction of government control is features of .....................
Answer: Liberalization.

Question. Foreign Investment promotion board was set up to promote and channelize ...............in India. 
Answer: foreign Investment

Question. Consumer get benefited by .......... competition after introduction of N.E.P.
Answer: increase

Question. After N.E.P there is a shift in market from Producers orientation to ..................
Answer: consumer orientation. 

Question. Privatization of ownership through sale of equity shares is called ................
Answer: disinvestment.

Question. N.E.P was introduce in India in the Year .............
Answer: 1991 

Question. Political boundaries no longer remain ............... for a business due to globalization. 
Answer: barriers

Question. All the factors of business environment are .............
Answer: inter related 

Question. Impact of N.E.P has been positive on Indian ...... and .............
Answer: Economy and business. 

Very Short Answer Type Questions :

Question. Govt. of India is seriously thinking to allow oil marketing public sector undertaking to fix their own price for petrol and diesel. Which economic reform is the reason of this change in government’s policy?
Answer: Liberalization

Question. Just after declaration of Lok Sabha Elections 2009 results, the Bombay stock exchange’s price index (Sensex) rose by 2100 points in a day. Identify the environmental factor which led to this rise.
Answer: Political Environment

Question. State any two impacts of change of government policy on business and industry.
Answer: (i) Increasing competition.
(ii) Rapidly Changing Technological Environment.

Question. “The understanding of business environment helps the managers to identify ‘threats’.” What is meant by ‘threats’ here?
Answer: Threats refer to the external environment trends and changes that will hinder a firm’s performance

Question.“Business environment includes both ‘specific and general forces.’ List any four specific forces.
Answer: Suppliers, investors, customers and competitors. 

Question. Explain the specific and general forces of business environment ? 
Answer: Business environment comprises of both specific and general forces. Specific forces refer to those forces that are having direct effect on the day to day working of the business viz. customers, competitors, investors etc. General forces refer to social, political, legal and other forces which are having an indirect effect on the operations of a business.

Question. Explain the importance of business environment. 
Answer: (a) Identification of Opportunities(positive changes) and first mover advantage :-
By studying business environment, a business can know expected positive changes in its favour, in advance and can take first advantage then other competitors.
Ex. TATA NANO Car.
first of all.
(b) Identification of threats and warning signals :-
By studying business environment, a business can know expected negative changes in its adverse, in advance and can make arrangement to remove the negative effect. Ex. Bajaj
started producing bikes with scooters.
(c) Helpful in tapping (assembling) resources:-
By studying
business environment, changes in demand of output can be known in advance. For production of changed output, required inputs may be arranged in advance.
(d) Helpful in coping (adjustment) with rapid changes:-
For survival with being fittest, two things are possible by study of business environment :-
---Timely estimation of expected positive and negative changes.
---Ready for adjustment for future changes, in advance.

Question. Explain the impact of changes in economic policy on the business. 
Answer: i) increase competition
ii) more demanding customers
iii) rapidly changing technological environment
iv) necessity for change

Question. Identify the type of dimension of environment to which the following are related :-
i) Banks reducing interest rates on housing loans.
ii) An increasing number of working women.
iii) Booking of air tickets through internet.
iv) Alcohol beverages are prohibited to be advertised on ‘Door Darshan’.
Answer:
(i) Economic Environment,
(ii) Social Environment,
(iii) Technological Environment,
(iv) Legal Environment

Question. Identify and explain the type of dimension of environment to which the following are related:
i. Banks reducing interest rates on housing loans.
ii. An increasing number of working women.
iii. Booking air ticket through internet.
iv. Alcoholic beverages are prohibited to be advertised on “Doordarshan”.
Answer: Type of dimension of environment
i. Economical
ii. Social
iii. Technological
iv. Legal