In an interview, an interviewer asked the interviewee regarding the need of considering the changes of environment. In reply one of the interviewee replied, "Every business should consider the changes going on in inflation rates before taking any financial decisions because inflation rates result in constraints on business enterprises as they increase the various costs of business such as the purchase of raw materials or machinery and payment of wages and salaries to employees." Interviewer liked the answer. Interviewee has put emphasis on the understanding of only one element of business environment. Identify that element of business environment.

Economic environment

The element of the business environment that the interviewee has emphasized is the Economic environment. The interviewee specifically mentioned inflation rates and their impact on various costs of business, highlighting the economic factors that businesses need to consider when making financial decisions.