Q:

What are economic factors?

A:

Quick Answer

Economic factors comprise the information that influences the value of an investment or business. When you are calculating the present and anticipated future value of an investment portfolio or a business, the economic factors are what you bear in mind. The primary economic factors are management, taxes, government policy, interest rates and labor costs.

Know More
What are economic factors?
Credit: carlp778 Moment Getty Images

Full Answer

Labor costs are an economic factor that has led many companies to outsource many of their basic functions to sites outside the United States. In many countries, especially in South and Southeast Asia, American companies have established factories, call centers and other facilities to handle many of their operational functions because workers there are much cheaper to hire.

Interest rates are more a factor for investment portfolios than businesses. When interest rates are higher, many investors turn to more secure vehicles, such as certificates of deposit, but when rates go down, some investors are willing to take on more risk through investments that lack government protection.

Government policy and taxes make up another reason why businesses choose particular states and countries for incorporation. The corporate tax structure in Delaware, for example, causes many firms to set up headquarters in that state, even though the primary business may be far across the country.

Management is a factor specific to each company. Businesses with effective management are much more likely to prosper and, therefore, are a stronger investment idea.

Learn More

Related Questions

  • Q:

    What is economic liberalization?

    A:

    Economic liberalization refers to those government policies which promote economic growth by opening up trade to international markets, extending the use of markets and lessening the restrictions and regulations placed on business. China, Brazil and India, three of the fastest growing transitioning economies, achieved their economic growth after their governments liberalized their approach to business. This has led some economists to believe that economic reform is of greater importance than political reform in developing economies.

    Full Answer >
    Filed Under:
  • Q:

    What is an economic region?

    A:

    An economic region is an area in which particular types of commerce take place based on administrative or geographical boundaries. These boundaries come in the form of state lines, international borders or natural geographic landmarks. Other factors, including the migration of labor, the consumer’s market and laws regarding trade, shape economic regions. There are several different types of economic regions, most notably large, small, urban and international.

    Full Answer >
    Filed Under:
  • Q:

    What is economic freedom?

    A:

    Economic freedom refers to a condition in which a person living in a community, state or country has the right to purse economic opportunities. This condition is associated with capitalistic countries where individual opportunities to find work and make money are typically promoted by limited government restrictions.

    Full Answer >
    Filed Under:
  • Q:

    What is economic feasibility?

    A:

    Economic feasibility is the cost and logistical outlook for a business project or endeavor. Prior to embarking on a new venture, most businesses conduct an economic feasibility study, which is a study that analyzes data to determine whether the cost of the prospective new venture will ultimately be profitable to the company. Economic feasibility is sometimes determined within an organization, while other times companies hire an external company that specializes in conducting economic feasibility studies for them.

    Full Answer >
    Filed Under:

Explore