Before the introduction to Business Economics, you should have an overview of the introduction to Business and Economics. Economics is the subject of Social Science, which deals with the studying of production, distribution, and consumption of goods and services. With the basics, it deals with how a society provides for its needs. In contrast, business is defined as the organization being engaged in commercial, industrial, or professional activities.
Coming to the introduction to Business Economics, it is the field of Economics that deals with the studies of financial, organizational, market-related, and environmental issues that the corporations face. It covers the concepts of scarcity, product factors, distribution, and consumption. It concerns the primary application of microeconomic principles to decision making by the corporate.
With the introduction to Business and Economics, it is clear that location is an entity that offers goods or services to customers. Maintaining an organized balance between unlimited desires and limited sources has portrayed the introduction to Business and Economics. So, having a clear idea about the introduction to Business Economics is fundamental.
The introduction to Business Economics is the integration of two major concepts:
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Managerial or Business Economics is the branch that deals with the organisation and allocation of a firm’s scarce resources to achieve its desired goals. Business Economics, thus, interconnects economic principles and business. It is a link between the theory of Economics and the decision sciences in the analysis of managerial decision-making.
Problem identification and solution to problems are the two essential elements of the decision-making of a corporate firm. Decision-makers inhibit ‘uncertainty’ of the real world where the changes are either in a hidden way or in an open manner.
Due to this uncertainty, prediction or estimation, it relates to the volume of sales of a product, cost of production, profit, etc. which is likely to be imperfect. So, in other words, Business Economics is a part of Applied Economics which is concerned with the application of economic concepts and analytical tools to the process of decision-making for a business enterprise.
The unit of studying Business Economics is the firm. So, Business Economics deals with the operation of a consumer, a corporation which involves the determination of a price of a product, revenue, costs, profit levels etc.
Professors H.C. Peterson and W.C. Lewis suggested that Business Economics must be considered as a part of applied microeconomics.
Business Economics is an application of microeconomics which focuses on the topics which are of much importance and interest. The topics include the theories of demand, production and cost, profit-maximising, the model of a firm, optimal prices of the advertising expenditures, government regulation etc.
In Business Economics, the primary importance upon the firm, the environment in which the firm finds itself and the business decision that the firm has to take.
Business Economics seeks to investigate and analyse how and why a business behaves. It looks at the implications of action, policies of the firm in which they operate and the economy as a whole.
Demand analysis and forecasting: It is the process of finding values for the demand in the future period. Demand analysis helps to see the various factors that are influencing product demand and provides guidelines for manipulation.
Cost analysis: It is the study of economic costs, which is combined with the data drawn from the firm accounting records (which is a shield significant cost estimate).
Inventory management: It mentions the stock of raw materials that a firm keeps. If the level of inventory is high, then it will show blockage of funds.
Price system: Price is the origin of a company’s profit. So, its success depends on how the pricing decisions are made.
Q. Which fields of study constitute Business Economics?
Answer: Business economics is a subject based on the principles of Economic Theory and Business Practices
A business economist identifies various problems that are uplifted by the company, finds out multiple reasons behind the issues and analyses the effects on the functioning of the firm and finally suggests rational alternative and corrective measures that are needed to be taken by the management. As a business economist, you need to carry out research and collect large amounts of information that will help over any aspect of Economics and social policy.
1. What are Microeconomics and Macroeconomics?
Answer: Microeconomics focuses on a smaller number of units. It does not portray the picture of the happenings in the wider economic environment. The studies include product pricing, consumer behaviour, factor pricing, the economic conditions of a section of people, the behaviour of the company and the location of the industry.
Macroeconomics analyses the overall economic conditions, which are the overall effect of millions of decisions made by different firms and consumers. The studies include the national income and output, general price level and interests, the balance between trade and payments, external value of the currency, overall savings, and investments and status of employment with the rate of economic growth.
2. What are the problems faced in Decision-making and Forward Planning?
Answer: The problems faced in decision-making and forward planning are given as follows-
The problem of the resource is a pressing problem for any company. Resources are not enough, so a firm has to organise resources efficiently to have optimal outcomes. Resource allocation problems include production programming, transportation problems, etc.
Inventory and queuing are other significant problems. The firm has to hold a minimum level of stocks of raw and finished products to minimise business uncertainties. Firms take decisions after the consideration of demand and supply conditions.
Decision-makers face investment problems too. Investment problems boil down to the question of the allocation of resources. The firm has to decide on the volume of investment.