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Introduction to Business Economics

Business economics analyzes how businesses use scarce resources to satisfy unlimited wants. It deals with issues like business organization, management, expansion and strategy. The scope of business economics includes market demand and supply analysis, production analysis, cost and profit analysis, market structures, pricing, objectives of firms, forecasts, and project planning. Economic concepts directly relevant to business decisions include demand analysis, production and cost analysis, market structure analysis, project appraisals, and firm behavior analysis. Basic concepts for business economic analysis help understand firm functioning and decision making.

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Rahul Dangle
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68 views2 pages

Introduction to Business Economics

Business economics analyzes how businesses use scarce resources to satisfy unlimited wants. It deals with issues like business organization, management, expansion and strategy. The scope of business economics includes market demand and supply analysis, production analysis, cost and profit analysis, market structures, pricing, objectives of firms, forecasts, and project planning. Economic concepts directly relevant to business decisions include demand analysis, production and cost analysis, market structure analysis, project appraisals, and firm behavior analysis. Basic concepts for business economic analysis help understand firm functioning and decision making.

Uploaded by

Rahul Dangle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

INTRODUCTION TO BUISNESS ECONOMICS


ECONOMICS:

MEANING -

Economics studies how societies use their scarce resources to produce and distribute commodities to satisfy
unlimited wants of its people.

Definition-

British economist, Lionel Robbins (1898-984) stated, economic problem is concerned with scare resource which
have alternative uses for satisfying human wants, which are unlimited. It is a problem of choice, a choice
between ends and also a choice of using scarce resources between alternative uses with the objective of
maximizing satisfaction.

BUSINESS ECONOMICS

Business economics is a field in economics that deals with issues such as business organization, management,
expansion and strategy. The primary focus of business economics is a business enterprise or the firm.

Business economics uses economic theory and quantitative methods to analyse the functioning of business
enterprises.

The scope of business economics can be explained as follows:

1. Market Demand and Supply: One of the most important areas of study in business economics is the
market. Producers produce for the market where the interaction between the demand and supply
determines the price.
2. Production Analysis: Business economics analyses the process of production. A firm tries to make
optimum use of the resources available to it in order to maximise Production and Minimise cost.
3. Cost and Profit Analysis: In order to analyse costs, cost functions are used to make decision regarding
optimum utilization of resources.
4. Market Structures: The Study of Market structures is a very important part of business economics. The
study of market structures like perfect competitions and oligopoly form an important part of business
economics.
5. Pricing: Pricing is one of most important business decisions that determines a firm’s revenue and profit.
6. Objectives of the Firm: Profit is the primary objective of business firms. Business economics studies
break-even analysis and profit maximising equilibrium of a firm.
7. Forecasts and Business Policy: A firm’s decisions are influenced by the larger economic, political and
social environment in which it operates. Government policies, national income changes, population
changes , business cycles, all effects a firm’s decisions.
8. Project Planning: Project planning or capital budgeting is done by any investor to determine the criteria
on which to make investment decision. The study of different methods of project planning is one of the
most important components of business economics.
REALATIONSHIP BETWEEN ECONOMIC CONCEPTS AND BUSINESS DECISIONS

We have discussed the nature and scope of business economics. From among the numerous economic
concepts and theories, some are more relevant and have a direct bearing on business decisions as explained
below.

Economic Concepts/Theory Business Economics/Decisions


1. Demand Analysis 1. Product, Pricing, innovation, Marketing
2. Production and Cost Analysis 2. Input-Output analysis, Use of technology,
productivity improvement, recycling wastes,
environmental compliance
3. Market Structure Analysis 3. Price-output decisions, marketing,
diversification, market expansion , mergers,
take-overs
4. Project Appraisals 4. Investment decisions
5. Firm’s Behaviour Analysis 5. Profit determination, sales, and market
share targets, stakeholders interest
6. Risk and Uncertainty Analysis 6. Economic forecasting and planning

BASIC CONCEPTS FOR BUSINESS ECONOMIC ANALYSIS

Business economic analyses are made with the help of some fundamental concepts and techniques. These are
used to understand the functioning of a firm and help in their decision making process. Some of these are
discussed here.

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