The two components of business environment affected are:
(i) Economic environment
The economic elements affect the business firms in the following ways:
(i) With an increase in the rates of taxation, business expenses increase. This causes a rise in the prices of goods, leading to fall in demand for such goods.
(ii) With an increase in the inflation rates, there is a rise in the cost of production. This affects the profits of the business adversely.
(iii) A rise in the per capita and disposable income will lead to an increase in the demand for goods and services.
(ii) Legal environment
The legal environment affects the business firms in the following ways:
(i) The advertisement of alcoholic beverages is prohibited, which affects the marketing of such products.
(ii) Products like tobacco and cigarettes are required to carry a statutory warning on their packages, 'Smoking is injurious to health'.

(i) Totality of external forces Business environment is aggregative in nature because it is the sum total of all the factors, individuals and institutions which affect its performance.
(ii) Inter-relatedness
All the elements of business environment are closely related. A change in one factor immediately affects another factor.

Business environment is not static and it keeps on changing. These changes are so fast and effective that a company has to scan its environment in order to survive in the long-run.
For example,
(i) Flat Screen TVs are replaced by LCDs and LEDs, is an example of technological change.
(ii) Shift towards health consciousness, leading to more healthy options food items, fitness equipment, etc, are examples of social change.
(iii) More impetus for development of communication and information technology is an example of political factor.

Impact of LPG (Liberalisation, Privatisation, and Globalisation) Policy Changes on Business and Industry
The policy of liberalisation, privatisation, and globalisation of the government has made a significant impact on the working of enterprises in business and industry.They have become more customer focused and have adopted measures to improve customer relationship and satisfaction.
Following are some of the challenges faced by the business and industries.
1. Increasing Competition
Changes in the rules of industrial licensing and entry of foreign firms, has increased the competition for Indian firms especially in service industries such as banking, communication, health, etc.
2. More Demanding Customers
Due to increase in competition, wider choice of products is available in the market.As a result, customers are becoming more choosy.He is now regarded as the 'King of the market'.
3. Rapidly Changing Technological Environment
Increased competition in market forces the firms to develop new ways to survive and grow in market.Due to this, smaller firms face tough challenges for transformations in processes, technology, machines, and products.
4. Necessity for Change
Rapid change in the market forces the enterprises to continuously modify their operations.
5. Need for Developing Human Resource
The new market conditions require people with higher competence and greater commitment.Thus, the need to develop human resource is increasing.
6. Market Orientation
Earlier firms used to produce first and then sell goods in the market.But now, in the fast changing world, production-oriented technique is changed to market orientation, where firms study and analyse the market first and produce goods accordingly.
7. Loss of Budgetary Support to the Public Sector
The central government's budgetary support for financing the public sector outlays has declined over the years.
Public sector undertakings have realised that in order to survive, they will have to develop their own resources and be more efficient.

Business environment refers to all those factors and forces, which lie outside a business enterprise and are beyond its control.These factors and forces exercise a significant influence on business.
There is close and continuous interaction between business and its environment.
Components of business environment
(a) Economic Environment:
The economic environment consists of the factors and forces concerning with means of production and distribution of wealth.It compromises of interest rate, rate of inflation, value of GDP, per capita income, tax rates, disposable income, etc.
(i) Components of Economic Environment:
a. Structure of economy
b. Rate of growth of GNP
c. Per capita income
d. Rates of savings and investments
e. Balance of Payments
f. Value of exports and imports
g. Agricultural and industrial production
h. Money supply in the economy
i. Public debt
(b) Social Environment:
The social environment consists of all the social and cultural forces within which business firms operate.It comprises of customs and traditions, values, social trends, etc.
(ii) Components of Social Environment 
a. Concern with quality of life
b. Life expectancy
c. Expectations from workforce
d. Birth and death rates
e. Population shifts
f. Educational system and literacy rates
g. Consumption habits
h. Composition of family
i. Attitudes towards product innovations, lifestyles, etc.
(c) Technological Environment:
It refers to the change, taking place in the method of production and use of equipment to improve the quality of product.
In other words, we can say technological environment includes forces relating to scientific improvements and innovations, which provide new ways of producing goods and services and methods and techniques of operating a business. 
(iii) Components of Technological Environment
a. Spirit of invention and innovation among people.
b. Facilities for research and development.
c. Incentive and concessions for development and application of new technology
d. Legal protection for intellectual property rights.
e. Access to foreign technology.
(d) Political Environment:
The political environment consists of the forces concerning management of public affairs and their impact on business.It includes political conditions in the country and attitude of the government towards business and business policy.
(iv) Components of Political Environment
a. The constitution of the country
b. Political stability
c. Political ideology
d. Political outlook on business sectors
e. Extent and nature of government intervention in business
f. Degree of politicization of business and economic issues.
(e) Legal Environment:
Business has to function within the framework of laws and regulations of the country. Non-compliance with these regulations can create legal problem for business enterprises.
A number of laws have been implemented by the government through the enactment of the Companies Act, Foreign Exchange Management Act, Factories Act, Competitions Act, etc.
(v) Components of Legal Environment
a. Legislation passed by the government
b. Court judgments
c. Decisions of various commissions and agencies at every level of administration
d. Administrative orders.

Components of business environment
(i) Components of Economic Environment:
1. Structure of economy
2. Rate of growth of GNP
3. Per capita income
4. Rates of savings and investments
5. Balance of Payments
6. Value of exports and imports
7. Agricultural and industrial production
8. Money supply in the economy
9. Public debt
(ii) Components of Social Environment 
1. Concern with quality of life
2. Life expectancy
3. Expectations from workforce
4. Birth and death rates
5. Population shifts
6. Educational system and literacy rates
7. Consumption habits
8. Composition of family
9. Attitudes towards product innovations, lifestyles, etc.
(iii)Components of Technological Environment
1. Spirit of invention and innovation among people.
2. Facilities for research and development.
3. Incentive and concessions for development and application of new technology
4. Legal protection for intellectual property rights.
5. Access to foreign technology.
(iv) Components of Political Environment
1. The constitution of the country 
2. Political stability
3. Political ideology
4. Political outlook on business sectors
5. Extent and nature of government intervention in business
6. Degree of politicization of business and economic issues.

(i) Encouraging the use of alternate resources.
(ii) Economically usage of commodities
(iii) Proper utilisation of scarce resources
(iv) To be conscious to live within limited budget of available commodities

(i) Welfare of the family/society
(ii) Protection, care for the society
(iii) Reduction of prevalent social evil
(iv) Abiding the law

i) Responsibility to use resources
ii) Care for his customers
iii) Adaptability
iv) Commitment to serve the stakeholders in a better manner.

i) Encouragement to country made products
ii) Development of market for domestic products
iii) Development of National Values

i) Fall in Standard of living
ii) Increase in Domestic Expenditure
iii) Increase in the cost of agricultural products