A2zNotes.com -Best Bcom BBA Bed Study Material

MBA 1st Year Economic Political Legal Business Environment Short Question Answer Model Paper

MBA 1st Year Economic Political Legal Business Environment Short Question Answer Model Paper :- In this Post you will find MBA 1 year related to important questions related to the answer such as the Economic Political Legal Business Answer and many other important questions. Short Questions are answer in English Section B

More MBA 1ST year Question Answer in English

Section B

MBA 1st Year Economic Political Legal Business Environment Very Short Question Answer Sample Paper
MBA 1st Year Economic Political Legal Business Environment Short Question Answer Sample Paper


Q.1. Write a short note on political Institutions.

Ans. Political institutions are organisations which create, enforce and apply laws that mediate conflict, make (governmental) policy on the economy and social systems and otherwise provide representation for the public. Examples of such political institutions include political parties, trade unions and the (legal) courts. The term ‘Political institutions’ may also refer to the rece of rules and principles within which the organisations operate, including such concepts as the right to vote, responsible government and accountability.

Such arrangements are called institutions. A democracy works well when these institutions perform functions assigned to them.

1. The parliament makes important laws for the entire nation. 

2. The prime minister and the cabinet are institutions that take all important policy decisions. 

3. The civil servants, working together, are responsible for taking steps to implement the ministers’ decisions. 

4. Supreme Court is an institution where disputes between citizens and the government are finally settled. 

Q.2. What is the role of government in business? 

Ans. Role of Government in Business Government is a very powerful institution which can create a favourable business environment. We can study its role under the following heads:

1. Government: Regulator of Business: The entire regulatory legislations and policies stand covered under this segment. On the one hand, there is a very large indirect area of government control over the functioning of private sector business through budgetary and monetary policies.

But against this there is also a fast expanding area of direct administrative or physical controls through which the government seeks to ensure that private investment and production in industry and the use of scarce resources conform to government’s basic socio-economic objectives.

They have become necessary tools in a system which seeks to avoid total nationalisation of resources.

Government’s regulatory functions with regard to trade, business and industry aim at laying down the limits for the private enterprise. The regulatory functions of the Government include: (a) restraints on private activities, (b) control of monopoly and big business, (c) development of public enterprises as an alternative to private enterprises to ensure competitive dualism, (d) maintenance of a proper socio-economic infrastructure.

2. Government: Promoter of Business: The promotional role of the government in relation to industries can be seen as providing finance to industry, in granting various incentives and in creating infrastructure facilities for industrial growth and investment.

For example, our government has identified certain backward areas as ‘No industry districts To promote development of such areas, Government provides subsidies and tax holidays to attract investment in backward areas.

In this way, the government will help the government will help the process of balanced development and thereby remove regional disparities. The government is assisting the development of small scale industries. 

The District Industrial Centres are assisting The development of small industries. The government is actively helping the industrial development of the country by providing finance to them through the development banks. 

3. Government as an Entrepreneur: The impressive growth of the public sector in India from a Small beginning bears testimony to the role of the government as an entrepreneu.

Private investors are solely guided by private profit motive and hence they are not interested in developing product of common public use and social services which yield relatively lower returns, but as social entrepreneur the government does not hesitate to take them up  

Government as the planner: In its role as a planner, the  government indicates various priorities is the Five Year Plans and also the sectoral allocation of resources. Mixed economies are democratically planned economies.

The government tries to manage the economy and its business activities through the exercise of planning, Planning is the most important activity in a modern mixed economy. The idea of economic planning can be traced to three different sources: Rationalism, Socialism and Nationalism.

Economists advocate a planned economy on the ground that it can be a rational economy which can utilise the available resources in an optimal manner.

in other words, the planned economy is a national economy which attempts to secure the maximum return with minimum wastage of productive resources.

MBA 1st Year Economic Political Legal Business Environment Short Question Answer Model Paper

Q.3. Describe the legal framework in India.

Ans. Foreign investors including companies looking to enter India or already operating in India need to understand the Indian legal and regulatory environment.

1. Entry Options: An appropriate entry strategy is a must for every foreign investor seeking to do business in India or with counter parties based in India. Entry strategy would usually vary depending upon the nature of business, the concerned sector, scale of operations and costs, and other commercial objectives. Broadly, foreign investors can set up either a company, branch/liaison office or a Limited Liability Partnership (LLP) in India. Indian companies are governed by the new company law, the Companies Act, 2013. LLPs are governed by a separate legislation, the Limited Liability Partnership Act, 2008. It may be pointed out that the Indian government has launched a series of initiatives aimed at enhancing the ease of doing business in India.

2. Foreign Investment Policy: Foreign investments into India are governed by a comprehensive Foreign Direct Investment (FDI) policy issued annually by the department of industrial policy and promotion, which works under the aegis of the Ministry of Commerce and Industry, Government of India. The FDI policy is supplemented by various press notes that are issued throughout the year as and when a policy change is announced. This policy framework is operationalised by rules, regulations and circulars issued by India’s Central Bank, the Reserve Bank of India.

3. Taxation: Income tax in India is governed by a Central legislation, the (Indian) Income Tax Act. 1961, while indirect taxes such as value added tax, customs and excise duty are subject to both Central and State laws. Currently the corporate tax rate stands at 30% (excluding surcharge and cess), however the Government has announced that this would be progressively reduced to 25% over the next 4 years. India also has transfer pricing rules that apply to related party transactions. On the indirect taxes front a comprehensive Goods and Services Tax (GST) is likely to be introduced in India in 2016. This will go a long way in reducing complexity and eliminating multiple taxation.

4. Exit Strategy and Dispute Settlement in India: Since entering a new market is a major commitment for every investor, the exit strategy should also be planned in advance as the cost and barriers to exit can often determine the entry strategy. Maintaining a comprehensive exit strategy is important for the following reasons:

(a) Changes in business conditions or regulatory environment.

(b) Cashing out on a venture that is successful

(c) If the goals and objectives of the company/partners involved change with time 

(d) If one of the partners involved in an agreement is acquired or gets into financial trouble. 

(e) For settlement of disputes when a partnership is not working out

5. Employment Laws: An investor should familiarise himself with Indian labour laws at the time of commencing operations in India. Though several labour laws are formulated by the centre, there are state specific rules that the investor should take note of and these would vary depending on the state where the investor commences operations. The investor should ensure that appropriate registrations are obtained and all HR records, files, documents and correspondences are maintained according to the requirements under Indian labour laws.

6. Anti-trust Regulation in India: India’s Competition Act, 2002 (the Act) is the principal legislation dealing with anti-trust issues. The Act prohibits or regulates (a) anti-competitive agreements, (b) abuse of a dominant position and (c) combinations.

Anti-competitive agreements are broadly defined as any agreement in respect of ‘Production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Certain agreements such as tie-in arrangements or bid-rigging are presumed to cause an appreciable adverse effect on competition

Q.4. What do you mean by economic system? What are its various constituents? 

Ans. Meaning of Economic System: An economic system or economy is a system designed by a nation to utilise its resources for the purpose of satisfying the needs and wants of people.

An economic system consists of those institutions which a given nation or group of nations has chosen or accepted as the means through which their resources are utilised for the satisfaction of human wants:

An economic system comprises of all the institutions, organisations and policy mechanisms by which the people of a country manage and utilise the country’s resources to obtain the things they need. It is the network of economic relationships in the society arising from the organisation and/or mode of production, distribution, consumption and exchange. Economic system embodies the nature of property rights, ownership of resources, market mechanism, role of the state, etc.

Basic Constituents of an Economic System: An economic system consists of several entities. some of which are given below:

1. Household: The simplest but the most significant unit is the household which means all the persons living together as one family. The ultimate purpose of all economic activities is the satisfaction of household needs and wants. Every household has limited means but multiple needs. This gives rise to the problem of allocation of scarce resources. For example, a household has to decide whether to buy a car or to send the child abroad for higher education. In the same manner, a household has to decide what part of family income to consume and what part to save.

2. Firm: Firm is a unit of ownership, management and control. It is a business unit that owns and controls one or more factory/branch/office and is engaged in the production and/or distribution of some product or service. A firm is that unit of the economic system which performs some industrial or commercial activity. While household represents the demand side, firm represents the supply side of the economy. The person who launches a firm is called entrepreneur: The entrepreneur takes decisions relating to the size of the firm, location of plant/office, nature and quality of the product to be manufactured, the factors of production to be employed, fixation of price, sales promotion, distribution channel, source of finance, etc.

3. Industry: Industry means all the firms producing the same or similar products. According to E.S. Florence, An industry is a group of firms tending to specialise in the same transactions or series of transactions. A firm is a single unit of production whereas an industry comprises of all the firms roducing the same type of product. For example, Maruti Udyog is a firm while all the firms producing ars constitute the car industry.

4. Government: Government consists of all public agencies, State bodies and other units which govern the country. In India, there are two types of governments:

(a) Central Government, and (b) State Government.

Each type of Government maintains law and order and provides public services (for example education, health, water, electricity, telephone, public transport, etc.). In addition there are government or public enterprises (for example, Indian Oil Corporation, State Bank of India, Steel Authority of India) which are engaged in the production and supply of certain commodities or services. As a political entity, government is empowered to create laws for regulating business.

Leave a Reply