- 1. Business Economics
Unit 1
- 2. Introduction to Business Economics
The application of economic concepts, theories,
logic, and analytical tools in the assessment and
prediction of market conditions and business
environment of economics to business decision
making has come to be widely recognized.
Consequently, economic theories and analytical
tools, which are widely used in business decision
making, have crystallized into a separate branch
of management studies called managerial or
business economics.
- 3. Definitions
• In the words of Mansfield:-
• “Business Economics is concerned with the
application of economic concept and economics
to the problems of formulating national
decision-making”.
• In the words of Spencer and Seigelmar:-
• “Business Economics is the integration of
economic theory with business practice of the
purpose of facilitating decision-making and
forward planning by management”.
- 4. Characteristics/Nature of Business
Economics:
• Micro and Macro Economics
• Economic Concepts for Decision Making
• Pragmatic ( Dealing with problems in Practical
Way)
• Normative Economics ( Ideological
Prescriptive Judgements)
• Dynamic Environment
• Applied Branch of Knowledge
- 5. Scope of Business Economics
• Demand analysis and forecasting
• Cost and Production Analysis
• Pricing Decisions Policies and Practices
• Profit Management
• Capital Management
• Inventory Management
• Advertising
- 6. Significance of Business Economics
• Business Economics accomplishes several
objectives:
• First:- Business economics is concerned with
those aspects of traditional economics which are
relevant for business decision making in real
life.
• Secondly:- It also incorporated useful ideas from
disciplines such as, Psychology, Sociology etc., if
they are found relevant for decision making.
- 7. • Thirdly:- Business economics helps in reaching
a variety of business decisions in a
complicated environment. Certain examples
are : (i) What products and services should be
produced?
• (ii) What input and production technique
should be used?
- 8. • (iii) How much output should be produced
and at what prices it should be sold?
• (iv) What are the best sizes and locations of
new plants?
• (v) When should equipment be replaced?
• (vi) How should the available capital be
allocated?
- 9. • Fourthly:- Business economics makes a
manager a more competent model builder.
It helps him appreciate the essential
relationship Characterizing a given
situation.
- 10. • Fifthly:- At the level of the firm. Where its
operations are conducted though known
focus functional areas, such as finance,
marketing, personnel and production,
business economics serves as an integrating
agent by coordinating the activities in these
different areas.
- 11. • Finally:- Business economics takes
understanding of the interaction between the
firm and society, and accomplishes the key
role of an agent in achieving its social and
economic welfare goals.
- 12. Difference between Economics &
Business Economics
- 13. What is Microeconomics?
• Microeconomics is the study of how
individuals and firms make choices
regarding the allocation and utilization of
resources. It also studies how individuals
and businesses coordinate and cooperate,
and the subsequent effect on the price,
demand, and supply. Microeconomics
refers to the goods and services market
and addresses economic and consumer
concerns.
- 15. What Is Macroeconomics?
• Macroeconomics is a branch of economics
that studies how an overall economy—the
market or other systems that operate on a
large scale—behaves. Macroeconomics
studies economy-wide phenomena such
as inflation, price levels, rate of economic
growth, national income, gross domestic
product (GDP), and changes
in unemployment.
- 18. INTERDEPENDENCE OF MICRO
AND MACRO ECONOMICS
• Microeconomics and macroeconomics are
two major branches of economics. So,
they both are interdependent. Firm wise,
individual wise, sector wise, district wise
study of any economic activity is
microeconomics. Overall study of all those
study is macro study. So, any change in
firm or individual or sector or district
strongly affect to the national or macro
economy.
- 19. Dependence of microeconomics in
macroeconomics
• Microeconomics matters deeply depend
upon the macroeconomic activity. For
example, price, rate of interest, rate of
profit, wages etc all are known as
microeconomic topics. But all they depend
upon macroeconomic behavior. Price, rate
of interest, wage are determined by their
demand and supply in country not by
individual demand and supply.
- 20. Dependence of macroeconomics in
microeconomics
• Macroeconomics is overall study of
microeconomic units.
• For example, employment of the country
is the sum of all individual employment in
different sectors. National income and
national output is the sum of income and
output of thousands of person and firms.
- 21. • Same way many theories of macroeconomics are
derived from microeconomics theories.
• For example total consumption function and
total investment function are based on the
behavior of individual consumers and firms
respectively. Thus, as a conclusion, it can be
said that the study of macroeconomics comes
throughout of microanalysis.
