CBSE Class 12 Business Studies Business Environment VBQs

Question. change in sensex and Nifty during election is part of ……
A. political environment
B. social environment
C. legal environment
D. economic environment

Answer : A

Question. the importance of business environment which helps to know in advance forthcoming trends constants and threats of business is
A. helpful in getting first mover advantage
B. early warning signals
C. assist in planning and policy making
D. all of the above 

Answer : D

Question. shift of youth in India towards packed food, online buying is part of……
A. political environment
B. social environment
C. legal environment
D. technological environment 

Answer : B

Question. the environment scanning helps to identify
A. opportunities
B. threats
C. both a and b
D. none of the above 

Answer : C

Question. change in Taxas is part of
A. economic environment
B. political environment
C. legal environment
D. social environment 

Answer : A

Question. the conditions in business environment keep changing as it is
A. external environment
B. complex
C. dynamic
D. none of the above 

Answer : C

Question. Through environmental scanning, business firms can enjoy ……..
A. competition
B. first mover advantages
C. benefit of tax
D. tapping useful resources 

Answer : B

Question. it is compulsory that advertisement on baby food must inform that “mothers milk is the best” is related to
A. social environment
B. economic environment
C. political environment
D. legal environment

Answer : D

Question. demonetisation has direct impact on
A. social environment
B. political environment
C. economic environment
D. none of the above 

Answer : C

Question. the forces in business environment that effect all the business houses are known as
A. general
B. specific
C. particular
D. influential 

Answer : A

Question. ………….Facebook, Twitter and WhatsApp is the result of …….
A. political environment
B. economic environment
C. social environment
D.technological environment 

Answer : D

Question. swachh Bharat abhiyan started by BJP government is part of ….
A. legal environment
B. social environment
C. political environment
D. economic environment 

Answer : C

Question. opening doors for private sector in the area reserved for public sector is known as
A. privatisation
B. liberalisation
C. globalisation
D. none of the above 

Answer : A

Question. creating a website and selling online is related to….
A. social environment
B. political environment
C. economic environment
D. technological environment 

Answer : D

Question. “sudden announcement of demonetisation by our Prime Minister” is an example of this feature of business environment.
A. relativity
B. specific and general forces
C. interrelated
D. uncertain 

Answer : D

Question. business environment includes
A. surroundings of business
B. forces, factors, institutions which directly or indirectly effect business
C. customers and employees
D. none of the above 

Answer : B

Question. relaxation or removal of strict rules and regulations is part of of ……
A. liberalisation
B. globalisation
C. privatisation
D. all of the above 

Answer : A

Question. attitude of customers towards innovation,lifestyle,etc. is part of ……
A. technological environment
B. social environment
C. political environment
D. legal environment 

Answer : B

Question. The income and expenditure policy of the government is called.
(a) Fiscal Policy
(b) Industrial Policy
(c) Trade Policy
(d) Monetary Reforms

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. Does study of business environment help in maintaining image in market?
(a) Yes, study of business environment is necessary for maintaining good image in market.
(b) No, study of business environment is not necessary formaintaining good image inmarket.
(c) Study of social environment is necessary instead of business environment, for maintaining good image in market.
(d) None of the above

Answer : A

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

Answer : A

Question. As a foreign tourist visited India, he noticed that Indian markets, tastes, trends and regulations were different from that of his country. Which feature of business environment is reflected here?
(a) Uncertainty
(b) Dynamic
(c) Relative concept
(d) All of these

Answer : C

Question. For the two statements given below, choose the correct option
Statement I Environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality.
Statement II Frequent environmental changes in the field of technology and fashion industry are related with uncertainty of business environment.
Alternatives
(a) Statement I is correct and Statement II is incorrect.
(b) Statement II is correct and Statement I is incorrect.
(c) Both the statements are correct.
(d) Both the statements are incorrect.

Answer : C

Question. Understanding of business environment helps the firm to identify opportunities to get the ................
(a) early warning signals
(b) first mover advantage
(c) useful resources
(d) None of these

Answer : B

Question. Which of the following is the feature of business environment?
(a) It is a relative concept since it differs from country to country and even region to region.
(b) It enables the firm to identify opportunities and getting the first mover advantage.
(c) It helps in tapping useful resources.
(d) All of these

Answer : D

Question. Analysing process of change in the business environment involves conceptualising it as
(a) Divisible in nature
(b) Complex in nature
(c) Dynamic concept
(d) Static concept

Answer : C

Question. In accordance with the economic planning, the government of India gave a lead role to the public sectors for infrastructure industries whereas the private sectors were broadly given the responsibility of developing consumer goods industry. At the same time, the government imposed several restrictions, requisitions and controls on the working of private sector enterprises. Identify the dimension(s) of business environment highlighted above.
(a) Economic environment
(b) Legal environment
(c) Political environment
(d) All of these

Answer : D

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. Business environment is a group of powers.
(a) Special
(b) General
(c) Internal
(d) Special and General

Answer : D

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. Liberalisation means
(a) Integration among economies
(b) Reduced government controls and restrictions
(c) Policy of planned disinvestments
(d) None of them

Answer : B

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

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

Answer : B

Question. Which of the following does not characterise the business environment?
(a) Uncertainty
(b) Employees
(c) Relativity
(d) Complexity

Answer : B

Question. In all the countries there is a free-flow of goods and services under which of the following does it come?
(a) Liberalisation
(b) Privatisation
(c) Liberalisation and Privatisation
(d) Globalisation

Answer : D

Question. Which of the following is an example of social environment?
(a) Money supply in the economy
(b) Consumer Protection Act
(c) The Constitution of the country
(d) Composition of family

Answer : D

Question. Reducing the role of Public Sector and increasing the role of Private Sector fall sunder .
(a) Liberalisation
(b) Privatisation
(c) Liberalisation and Privatisation
(d) Globalisation

Answer : B

Very Short Answer Questions :

Question. Which process aims at giving greater role to the private sector role to the public sector?
Answer : Privatization

Question. ‘Demand for reservation in jobs for minorities refers to an example of key component of general environment of business. Name this component.
Answer : Social Environment

Question. Banking sector reforms have led to easier credit terms and better services. This is an example of a key component of the “Business Environment “ name this component?
Answer : legal Environment 

Question. It is the process by which government control over the industry is being loosened. Give the term to which this statement is trying to indicate.
Answer : Liberalization

Question. Which element/dimension of business environment involves improvement and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
Answer : Social Environment

Question. Which environment prohibits the advertisement of alcoholic beverages?
Answer : Technological Environment

Question. Banking sector reforms have led to easier credit terms and better services. This is an example of a key component of the “ Business Environment" name this component?
Answer : Economic Environment

Question. “The understanding of business environment enables the firm to identify opportunities”. What is meant by opportunities here?
Answer : Opportunities here refer to the favorable condition in the organization environment.

Question. Which environment prohibits the advertisement of alcoholic beverages?
Answer : Legal Environment

Question. Out of liberalization, privatization and globalization, which one is associated with “Abolition of licensing requirement in most of the industries”?
Answer : Liberalization

Question. ‘Demand for reservation in jobs for minorities refers to an example of key component of general environment of business. Name this component.
Answer : Social Environment

Question. In the year 2006, Centre for Science and Environment (CSE) claimed to have found pesticides in Pepsi Co and Coco Cola soft drink 50 times more than permissible health limit- These companies sales being adversely affected in that year”. This is the effect of which environment?
Answer : This is the effect of Legal environment

Short Answer Questions :

Question. State the component of business Environment.
Answer : Components of Business Environment
a. Internal Environment
b. External Environment
c. Micro Environment
d. Macro Environment

Question. State the factors of Macro Environment.
Answer : a. Economical Environment
b. Political Environment
c. Social Environment
d. Legal Regulatory Environment
e. Technological Environment

Question. State the factors of Micro Environment.
Answer : a. Customers
b. Suppliers
c. Competitors
d. Public
e. Marketing intermediaries.

Question. Write the impact of changes in government policy on business and industries.
Answer : Impact of changes in govt. policy on business are:
a. Increasing competition
b. More demanding
c. Rapidly changing technology environment
d. Necessity for change
e. Need for developing human resources.
f. market orientation
g. Loss of budgetary support to the public sector.

Question. State the characteristics of business environment.
Answer : 1. Totality of external forces.
2. Specific and general forces
3. Inter-relatedness.
4. Dynamics
5. Complexity.
6. Relatively

Question. State the difference between general and specific environment with example.
Answer : Examples of Specific Environment of Business.

Question. State the importance of business.
Answer : Importance of business Environment are:
e. First mover advantage
f. Warning signal
g. Taping useful resources
h. Coping with rapid changes
i. Assisting in planning and policy
j. Improving in performance.

Question. Explain any five positive effects of liberalization and globalization on business and industry.
Answer : The positive effects of liberalization and globalization on business and industry are
1. All round competition
2. Export became matter of survival.
3. World class technology.
4. Buyer’s market increase in production capacity.

Question. State the economics reforms since 1991 or new Economics policy.
Answer : Liberalization
b. Privatization
c. Globalization

Question. Explain any five negative effects of liberalization and globalization on business and industry in India.
Answer : The negative effects of liberalization and globalization on business and industry in India are
a) Destabilization of protected environment.
b) Threat from MNC’s
c) Corporate vulnerability
d) Past failure fail to guide
e) Acquisitions and mergers

Question. State the difference between general and specific environment with examples.
Answer : Business environment includes both specific forces (investors, customers, competitors and suppliers) and general forces (economic, social, political, legal and technological
conditions). Specific forces affect an individual firm directly and immediately in its dayto-day working while general forces have impact on all business firm and thus may affect an individual firm only indirectly.

Question. Mr. Ajay after completing MBA from USA comes to India to start a new business under the banner Ecom creations Ltd. He launches a new product in e-learning for senior secondary school students in commerce stream, which already has an established market in UK and USA but not in India. His business starts flourishing in India. Now more Indian companies entered into the market with other subject also.
Identify and quote the line from above para which highlight the significance of understanding business environment.
Answer : a) Comes to India to start a new business……. launches a new product in e-learning for senior secondary school student in commerce stream.
(1) It helps in assisting in planning and policy formulation.
(2) It helps the firm to identify opportunities and get the first mover advantage.
(a) His business started flourishing in India.
(3) It helps in improving performance.
(b) Now more Indian companies entered into the market with different subject also.
(4) It helps the firm to identify threats and early warning signals.

Question. What do you understand by legal environment? Give two examples which protect ‘consumer’s interests’.
Answer : Legal environment consists of rules and regulations, framed by the Parliament, under which business must operate. To exist and grow, business is required to follow all the rules and regulations that constitute this environment.
Two examples protecting ‘consumer’s interests’ are:
(i) Advertisement of alcoholic beverages is prohibited.
(ii) Packets of cigarettes should mention the statutory warning ‘Cigarette smoking is injurious to health’.

Question. Lately many companies have planned for significant investment in organised retailing in India. Several factors have prompted their decision in this regard- customer income is rising. People have developed a taste for better quality products even though they may have to pay more. The government permitted cent percent foreign direct investment in some sectors of retailing.
Identify the change in business environment under different dimension quoting the line from the above para.
Answer : Dimensions of business environment:
(1) Economic environment: customer income is rising.
(2) Social environment: people have developed a taste for better quality product even though they may have to pay more.
(3) Political environment: the government permitted cent per cent foreign direct investment in some sector of retailing.

Question. Explain “increasing competition” and “more demanding customers” as impact of government policy changes on business and industry?
Answer : Increasing competition: Government policies have enabled co-existence of government sector companies with private companies and compete fairly, leading to increasing competition.
More demanding customers: Government policies leading to economic libralisation allow consumers to become well-informed, increase their purchasing power (through rising incomes) and change their lifestyle, which makes them more demanding about quality and value-driven products/services.

Question. The understanding of business environment enables the firm to identify opportunities and threats. What do opportunities and threats means here?
Answer : Opportunities refer to the positive external trends /changes that will help to improve a firm’s performance. On the other hand threats refer to the external environment trends /changes that will hinder a firm performance.

Question. With change in the consumption habit of people, Neelesh, who was running a sweet shop shifted to chocolate business. On the eve of diwali he offered chocolate in attractive packages at reasonable price. He anticipated huge demand and created a website chocolove.com for taking order online. He got lot of orders online and earned huge profit by selling chocolates. Identify and explain the dimensions of business environment discussed in the above case.
Answer : 1. Social environment: It includes social forces like custom and tradition, values, social trends and society’s expectation from business.
2. Technological environment: It includes forces relating to scientific improvement and innovation which provide new ways of producing goods & services and new methods and techniques of operating a business.

Question. Explain dynamic nature and uncertainty as features of business environment.
Answer : Dynamic nature: Business environment is dynamic as it keeps on changing in term of technological improvement, change in fashion and taste, entry of new competitors in the market, etc.
Uncertainty: Business environment is uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently e.g. in case of IT and fashion industries.

Long Answer Questions :

Question. Understanding of environment by business managers enables them not only to identify and evaluate, but also to react to the forces external to their firm. In light of the statement, explain by giving any five points why in the present day competitive market, it is essential for a business enterprise to remain alert and aware of its environment.
Answer : Importance of business environment:
1. Identify opportunities and get first mover advantage: Early identification of opportunities help the firm to be the first to exploit them instead of losing them to competitors.
2. Identify threats and early warning signals: Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.
3. Tap useful resources: A business firm assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc. from its environment.
4. Assist in planning and policy formulation: Since business environment provides both opportunities and threats for the firm, its understanding and analysis can be the basis for planning and policy formulation.
5. Helps in coping with rapid changes: Managers must understand and examine the environment and develop suitable courses of action to cope with rapid change in business environment.

Question. Ultra paint co. which is manufacturing paints had been enjoying a prominent market position as it is manufacturing best quality paints made timely payment of taxes to government. It assembled various inputs like finance, machines, raw materials, etc. form 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 manufacturing unit of the company.
(a) State the importance of business environment highlighted quoting the line form the above case.
(b) Identify any two dimension of business environment mentioned in above case by quoting line from it.
(c) State any two values which have been overlooked by the company?
Answer : (a) business environment helps in tapping useful resources.
♦ it assembled various inputs like finance, machines, etc. from its environment’.
(b) (1) Social environment 
♦ it has been dumping its untreated poisonous waste on the river bank which created many health problems for the people’.
(2) Legal environment
♦ the court passed an order to seal the manufacturing unit of the company’.
(c) Values overlooked:
♦ Environment protection
♦ Concern for human life
♦ Respect for law and order
♦ Social responsibility

Question. The court passed an order to ban polythene bags as
(i) The bags are creating many environment problems which affect the life of people in general.
(ii) Society in general is more concerned about quality of life.
The government decided to give subsidy to jute industry to promote this business. Innovative techniques are being developed to manufacture jute bags at low rates. Incomes are rising and people can afford to buy these bags.
Identify the different dimensions of business environment by quoting the lines form the above particulars.
Answer : (1) Legal environment: The court passed an order to ban polythene bags.
(2) Social environment: The bags are creating many environmental problems which affect the life of people in general. Social in general is more concerned about quality of life.
(3) Political environment: The government decided to give subsidy to jute industry to promote this business.
(4) Technological environment: Innovative techniques are being developed to manufacture jute bags at low rates.
(5) Economic environment: Incomes are rising and people can afford to buy these bags.

Question. Give the meaning of Demonetisation. Explain the features of it.
Answer : It is the act of removing a currency unit of its status as Legal Tender.
Features :
1. It is viewed as a Tax Administration Measure.
2. It has indicated that Tax Evasion will no longer be tolerated.
3. It led to channelizing savings into the formal financial system.
4. It aims to create a less-cash or cash-lite economy.

Question. Karodimal Ltd. manufactures fashionable and designer clothes. Recently it finds that the demand for its product been declining. After market research it was discovered that fashion and tastes of the consumers is changing a pace. Consumers demand is increasing. New competitors have entered the market with new design. It is difficult for the company to 
predict future happening. 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 product in the market. A meeting was held in which managers from different functional level heading production, marketing, financial 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 customers taste and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising, after sale service, etc. Identify any two features a business environment by quoting the lines from the above case.
(a) At which level of management the meeting of managers in Karodimal Ltd. was held.
(b) Identify any two impacts of government policy changes on business, quoting lines from the above case.
(c) State the importance of understanding of environment by business managers in the light of the above para.
Answer : (a) Features of business environment:-
(1) Dynamic nature–Fashion and taste of the consumer is changing at a fast pace.
(2) Uncertainty-It is very difficult for the company to predict future happening.
(3) Complexity – It is difficult to know the extent of the relative impact of the social, economic, political, technological or legal factor on decreasing in demand of its products in the market.
(b) Top level management
(c) Impact of government policy change in business
(1) Increasing competition – New competitors have entered the market with new design.
(2) More demanding customer- Customer demand is increasing.
(3) Market orientation – It was decided that they would study and analyse the market first to identify customer taste and fashion and then manufacture garments accordingly. It was also decided to increase expenditure on advertising after sale service etc.
(d) Business environment helps the manger in coping with rapid changes.

Question. The court passed an order that all school must have water purifier for the school children as society in general is more concerned about quality of life.
Innovative techniques are being developed to manufacture water purifier at competitive rates.
Incomes are rising and children at home are also drinking purified water.
The government is also showing positive attitude towards the water purifier business.
Identify the different dimensions of business environment by quoting lines from the above details.
Answer : (1) Legal environment: The court passed an order that all schools must have water purifier for the school children.
(2) Social environment: Society in general is more concerned about quality of life.
(3) Technological environment: Innovative techniques are being developed to manufacture water purifier at competitive rate.
(4) Economic environment: Income is rising and children at home are also drinking purified water.
(5) Political environment: The government is also showing positives attitude towards the water purifier.