Georgia DECA Advertising Practice Test

How do economic factors primarily influence the external business environment?

1. Affecting labor availability

2. Affecting customers' ability to spend

3. Affecting competitor prices

4. Affecting product quality

The correct answer is: Affecting customers' ability to spend

Economic factors primarily influence the external business environment by affecting customers' ability to spend. When the economy is strong, consumers typically have more disposable income and are more willing to make purchases, which can lead to higher sales for businesses. Conversely, during economic downturns, consumers are often more cautious with their spending due to uncertainty about their financial situation, reduced incomes, or higher unemployment rates. This change in customer purchasing behavior can significantly impact businesses, as they may need to adjust their pricing, marketing strategies, or even production levels to align with the current economic climate. While labor availability, competitor pricing, and product quality are important factors, they are often more indirectly influenced by the broader economic context. Consumer spending power is a direct driver of demand, making it a critical economic factor for businesses to understand and respond to in the external environment.