Business Economics
Introduction
Economics
The
term economics is
derived from two Greek
words OIKOS and NEMEIN
meaning the role or law of
the household.
Economics
Economics is the study of now people and
society, choose to employ scarce resources
with or without the use of money, that could
have alternative ;uses in order to productive
;various commodities and to distribute them
for consumption, now or in the future
among various persons and groups in
society.
Economics is as a Normative and
Positive Science
It deals with thing as they ought to be.
Economics is not only explaining facts as
they are but also justifies them.
Positive Science deals with things as they
are means What is.
Economics is as a Normative
and Positive Science
Basis
Positive
Normative
Expresses
What is
What ought to be
Based on
Cause & effect of
facts
& Ethics
Deal with
Actual or realistic
situation
Idealistic situation
Value judgment
Are not given
Are given
Micro & Macro
[Link]
Basis
Micro
Macro
Study
Individual
Economy as a
whole
Deals with
Individual Units
Aggregate Units
Tools
Demand &
Supply of a
Particular
Commodities
Aggregate
Demand
and Aggregate
Supply
of Economy as
a whole
Central problems
Price
Determination
of Commodities
or Factors of
Production
Determine
Level of
Inco-me &
Employment
Prices
Relative Prices
Decide
Absolute Price
Decide
Business economics
It is that branch of knowledge in which
theories of economics analysis are used
for solving business management
problem and determination of business
policies.
Business economics
Scope of business economics
Demand Analysis and Forecasting
Cost and production Analysis.
Pricing Decisions, policies and practices.
Profit Management.
Capital Management
Demand Analysis and Forecasting :
A business firm is an economic organisation
which transforms productive resources into
goods to be sold in the market. A major part
of business decision making depends on
accurate estimates of demand.
The main topics covered are: Demand
Determinants, Demand Distinctions and
Demand Forecast.
Cost and Production
Analysis
Production analysis is narrower, in scope
than cost analysis. Production analysis
frequently proceeds in physical terms while
cost analysis proceeds in monetary terms.
The main topics covered under cost and
production analysis are: Cost concepts and
classification, Cost-output Relationships,
Economics and Diseconomies of scale,
Production function and Cost control
Pricing Decisions, Policies and Practices :
Pricing is an important area of business
economic. In fact, price is the genesis of a
firms revenue and as such its success
largely depends on how correctly the pricing
decisions are taken. Price Determination in
Various Market Forms, Pricing Method,
Differential Pricing, Product-line Pricing and
Price Forecasting
Profit Management
Nature and Measurement of profit, Profit
policies and Technique of Profit Planning like
Break-Even Analysis.
Capital Management
Briefly Capital management implies
planning and control of capital expenditure.
The main topics dealt with are: Cost of
capital Rate of Return and Selection of
Projects.
Significance of Business Economics
Business economics is concerned with those
aspects of traditional economics which are
relevant for business decision making in
real life.
Business economics takes the help of other
disciplines having a bearing on the business
decisions in relation various explicit and
implicit constraints subject to which
resource allocation is to be optimized.
Significance of Business
Economics
Business economics helps in reaching a variety
of business decisions in a complicated
environment. Certain examples are:
What products and services should be produced?
What input and production technique should be used?
How much output should be produced and at what
prices it should be sold ?
What are the best sizes and locations of new plants ?
When should equipments be replaced ?
How should the available capital be allocated ?
Significance of Business
Economics
Business economics makes a manager a
more competent model builder. It helps him
appreciate the essential relationship
characterizing a given situation.
Difference between business economics & economics
Economics is the social science that studies the
production, distribution, and consumption of goods
and services. Economics aims to explain how
economies work and how economic agents interact.
Economic analysis is applied throughout society, in
business and finance but also in crime, education, the
family, health, law, politics, religion, social institutions,
and war. Economic textbooks distinguish between
microeconomics ("small" economics), which examines
the economic behavior of agents (including individuals
and firms) and "macroeconomics" ("big" economics),
addressing issues of unemployment, inflation,
monetary and fiscal policy.
Business economics (also called managerial
economics), is a branch of economics that applies
microeconomic analysis to specific business
decisions. As such, it bridges economic theory and
economics in practice. It draws heavily from
quantitative techniques such as regression analysis
and correlation, linear. If there is a unifying theme
that runs through most of business economics it is
the attempt to optimize business decisions given
the firm's objectives and given constraints imposed
by scarcity, for example through the use of
operations research and programming
Area of
differences
Economics
Business
economics
Nature
Economics deals with the
body of principles itself
It deals with application
of economics principles
to the problems of
business firms
Nature of economics
principles study
Deals with macro & micro
economic principles
Deals with micro
economics principles
Focus of study
Under micro economics as a
branch of economics
distribution theories like rent
and wages dealt with the
theories of profit
Main focus is profit
theory
Approach to study
Economic theories take
assumptions ,hypothesis of
economic relation and
generate economic models
It modifies already
existing economic
models to suit the
specific conditions and
problem of the business
firm
Methodology
Economic theory avoids
complexities and makes
simplified assumptions
Business economic is
pragmatic is sense.
