Introduction of Business and Economics
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. The basics deal 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 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.
Meaning of Business Economics
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:
Economic Theory
Business Practices
(Image will be uploaded soon)
Business Economics
Managerial or Business Economics is the branch that deals with the organization 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.
Characteristics of Business Economics
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-maximizing, the model of a firm, optimal prices of the advertising expenditures, government regulation etc.
In Business Economics, the primary importance is 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 analyze 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.
Scope of Business Economics
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 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.
Solved Example on Introduction to Business Economics
1. Which fields of study constitute Business Economics?
Answer: Business economics is a subject based on the principles of Economic Theory and Business Practices
Decision Making
Allocating resources is a critical task in business. And there are usually various options available. Decision Making is the process of evaluating all choices based on the information gathered and selecting the most efficient one. Because economic issues are founded on political and social issues, they grow increasingly complex. Making a decision is once again difficult because we make a judgment based on uncertain information and an unknown future. In such instances, the most we can do is encourage management to collect data as precisely as possible. Management must be equipped with accurate tools and analytical approaches to do this. Business economics is sometimes known as Managerial Economics since resolving management issues is an aspect of decision making.
Did you Know?
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.
FAQs on Introduction to Business Economics
1. What is the nature of Business Economics?
Business Economics is basically a science. Science is basically a structured collection of information that may demonstrate a cause-and-effect link. Furthermore, decision sciences include mathematics, statistics, and econometrics. Business Economics combines these decision sciences with economic theory to provide strategies that assist businesses in achieving their objectives. As a consequence, it employs scientific methodologies and verifies the accuracy of the results. This is one of the characteristics of business economics. Business Economics is mainly concerned with specific businesses' decision-making processes. As a result, it is dependent on microeconomic approaches. Business Economics is an art since it necessitates the application of rules and principles in order to achieve certain goals. Mathematics, statistics, accounting, marketing, and other fields are all used in business economics. As a result, it has an interdisciplinary aspect. Business Economics takes a practical approach. It aims to address the issues that businesses encounter in the real world. Business Economics takes a practical approach. It attempts to solve the challenges that businesses confront in the real world.
2. What is a normative economic theory?
A normative economic theory considers real-world events and proposes measures to increase the firm's economic well-being. Normative refers to something that is based on what is believed to be a usual manner of doing things and is based on an ideal or standard. In other words, it suggests how to use economic concepts while developing policies, making decisions, and preparing for the future. While positive economic theory explains the current state of the economy, normative economic theory suggests ways to improve it. Positive and normative theories are employed in Business Economics. However, the latter is weighted more heavily. "The government should make basic healthcare available to all citizens," is an example of normative economics. You can see that this remark is based on personal opinion and meets the requirement for should be' or 'ought to be'.
3. Where can I get useful study material for the Economics Chapter “ Introduction to Business Economics”?
Students can get all important Economics study resources on Vedantu's website. You may get free PDF study materials and solve your difficulties without having to wait for school to start. Students may get Sample Papers, Solution Papers, and notes that were created to assist them. These materials are brief and cover all of the important ideas as well as keywords that must be included in the examinations. By giving rapid and practical solutions to students' queries, these products help them cope with the rigors of a large curriculum. These resources are accessible for free on the Vedantu app as well. Smartphones and Laptops are compatible with Vedantu's app and students can access all the materials anytime as per their convenience.
4. What are Microeconomics and Macroeconomics?
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.
5. What are the problems faced in Decision-making and Forward Planning?
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.