Chapter 1
Monday, 11 November 2024 10:42 AM
Introduction to Business Economics
• Business economics is the integration of economic theory with business
practice with the aim of facilitating managerial decision making.
• Business Economics. is also known as managerial economics.
• According to McNair and Meriam, "Business economics deals with the use of
economic modes of thought to analyze business situation." In other words,
business economics is the applied branch of economics which analyze
business situations.
• Business Economics provides quantitative methods which explain various
concepts such as demand, supply, cost, price, competition etc. and used as an
aid to understand business environment and practices.
Characteristics of business economics.
• Business Economics is an Art as well as science-It is a science because it is
based on. Who's on Principles? And it is add because it is subjective in nature
by applying theoretical knowledge in Business
• Managerial decision-Business economics helps managers make informed
choices that align with the organization's strategic objectives.
• Business economics is microeconomics in nature-This is due to the study of
business economics, mainly at the level of the firm.
• Incorporation of macro analysis-Business economics recognizes the
importance of macroeconomics, even though it primarily focuses on
microeconomics
• Business Economics is pragmatic in its approach-It does not involve itself with
the theoretical controversies of economy.
• Nominative Nature-Business economics is prescriptive rather than descriptive
in nature.
Importance. Uses of business economics.
• Effective use of economic policies for development of business.
• Effective utilization of business resources.
• Full employment.
• Profit and wealth maximization.
• Identify, analyze internal and external factors.
• Framing business policies and predict the future.
Nature of business economics.
• Identify, analyze internal and external factors.
• Framing business policies and predict the future.
Nature of business economics.
Normative approach Positive approach.
What ought to be? What is?
Pass value conclusion. Cause and effect.
Idealistic situation. Actual or realistic
situation?
Subjective. Objective.
Scope of business economics.
• Demand analysis Forecasting. This is important for firms as accurate
predictions help them to know what amount of goods produced is required in
time.
• Production and cost analysis.-By production analysis, the firms can select the
appropriate production strategies. Cost analysis helps the firm to identify the
behavior of cost. Through this, a firm can maximize profit through the
producing optimum level of output at the least possible cost.
• Pricing decisions. Policies. And practices.- Price theory helps the business to
understand how prices and its policies are determined.
• Profit management. Profit management helps the firm to plan, calculate,
manage profits and understand such uncertain conditions.
• Capital Management A firm should effectively evaluate various investment
diseases so that the future project will be beneficial for the firm. Business
economics assist in the decision making process.
• Product policy, Market strategy. Every business need to proper analysis about
the nature and competition in the market. This analysis helps the firm to make
strategies for the market management. Also, it assess the firm in formulating
product policies.-
• Identify, analyze internal and external factors.
• Framing business policies and predict the future.
Nature of business economics.
Normative approach Positive approach.
What ought to be? What is?
Pass value conclusion. Cause and effect.
Idealistic situation. Actual or realistic
situation?
Subjective. Objective.
Scope of business economics.
• Demand analysis Forecasting. This is important for firms as accurate
predictions help them to know what amount of goods produced is required in
time.
• Production and cost analysis.-By production analysis, the firms can select the
appropriate production strategies. Cost analysis helps the firm to identify the
behavior of cost. Through this, a firm can maximize profit through the
producing optimum level of output at the least possible cost.
• Pricing decisions. Policies. And practices.- Price theory helps the business to
understand how prices and its policies are determined.
• Profit management. Profit management helps the firm to plan, calculate,
manage profits and understand such uncertain conditions.
• Capital Management A firm should effectively evaluate various investment
diseases so that the future project will be beneficial for the firm. Business
economics assist in the decision making process.
• Product policy, Market strategy. Every business need to proper analysis about
the nature and competition in the market. This analysis helps the firm to make
strategies for the market management. Also, it assess the firm in formulating
product policies.-
