BUSINESS

ECONOMICS
GROUP 3
Meaning of Economics
Meaning of Business Economics
Need for Business Economics
Definitions
Characteristics of Business Economics
Difference between economics and business
economics
Scope of business economics
Objectives of business economics
Role of a business economist
Micro and macro economics
Career Opportunities
Importance of Business Economics In our Country
WHAT IS ECONOMICS?
Economics as a subject deals with how people earn and
spend their income to maximize their economic gains. It
is concerned with the study of economic activities of
various individuals and the society.
Economics deals with economic problems of the
individuals business units, society and that of the globe.
An economic problem arises on account of the following
reasons:
1. Unlimited wants
2. Limited resources
3. Alternative use of resources
4. Problem of choices
Economics is a logic of
choice. It teaches the
art of rational decision
making in economizing
behavior to deal with
the problem of scarcity.
BUSINESS ECONOMICS
Business Economics deals with the
applications of economic laws to
business problems to take sound
business decisions.
Business Economics is a science
which deals with the application of
economic theories techniques
principles and concepts to business
management in order to solve
DEFINITIONS
According to Prof. Spencer and
Seigelman
Managerial economics is the
integration of economic theory
with business practice for the
purpose of facilitating decision
making and forward planning.
CHARACTERISTIC OF BUSINESS
ECONOMICS
Micro in nature
It is normative science which is goal oriented and
prescriptive science
It provides solutions to the problems
It is a study of decision making
It is a study of allocation of resources
It deals with economic behavior of the firm
It also studies various macro economic concepts
like GNP, GDP, NNP, inflation etc.
It is conceptual.
 DIFFERENCE BETWEEN ECONOMICS AND
BUSINESS ECONOMICS
E C O NO M I C S
1. It is more comprehensive
and wider in scope
2. It is concerned with body
of principles
3. It includes both micro and
macro economics
4. It is based on no of
assumption
5. It is both positive and
normative science
6. It discusses general
economic problems
7. Model building is the main
function of the economist
BU S I NE SS E C ON O MI C S
1.It is too narrow and has limited
scope
2.It deals with the application of
economic principles to the
problems faced
3.It is micro in nature
4.The scope of assumptions are
limited as it is concerned with
application of theories
5.It is mainly a normative science
6.It deals with the problems of a
firm only
7.Decision making and forward
planning is the main function of
the business economist
SCOPE OF BUSINESS ECONOMICS
The term scope refers to the area of study boundaries width
of the subject and subject . Some of the important topics
covered in this subject are:
1. Demand Analysis
2. Cost Analysis
3. Pricing Practices and Policies
4. Profit Management
5. Capital Management
6. Analysis of Business Environment
7. Inventory Management
8. Advertising
9. Resource Allocation
10.Risk and Uncertainty Analysis
DEMAND ANALYSIS
A business firm is in an economic organization which
is engaged in transforming productive resources into
goods that are to be sold in the market. A major part
of managerial decision-making depends on accurate
estimates of demand. A forecast of future sales
serves as a guide to management for preparing
production schedules and employing resources. It will
help management to maintain or strengthen its
market position and profit base. Demand analysis
also identifies a number of other factors influencing
the demand for a product. Demand analysis and
forecasting occupies a strategic place in Managerial
Economics.
COST ANALYSIS
Cost estimates are most useful for
management decision. The different
factors that cause variations in cost
estimates should be given due
consideration for planning purpose.
There is the element of uncertainty
of cost as other factor influencing
cost are either uncontrollable or not
always known.
PRICING PRACTICES AND POLICIES
As price gives income to the firm, it
constitutes as the most important field of
Business Economics. The success of a
business firm depends very much on the
correctness of the price decision taken by
it. The various aspects that are deal
under it cover the price determination in
various market forms, pricing policies,
pricing method, different pricing,
productive pricing and price forecasting.
PROFIT MANAGEMENT
The chief purpose of a business firm is to earn the
maximum profit. There is always an element of
uncertainty about profits because of variation in
cost and revenue. It knowledge about the future
were perfect, profit analysis would have been very
easy task. But in this world of uncertainty
expectations are not always realized. Hence profit
planning and its measurement constitute the most
difficult area of managerial economics. Under profit
management we study nature and management of
profit, profit policies and techniques of profit
planning like Break Even Analysis.
CAPITAL MANAGEMENT
The problems relating to firms
capital investments are perhaps the
most complex and the troublesome.
Capital management implies
planning and control of capital
expenditure. The main topics deal
with under capital management is
cost of capital, rate of return and
selection of projects.
ANALYSIS OF BUSINESS ENVIRONMENT
The environmental factors influence the working and
performance of a business undertaking. Therefore, the managers
will have to consider the environmental factors in the process of
decision-making. The factors which constitute economic
environment of a country include the following factors:
Economic System of the Country.
Business Cycles.
Fluctuations in National Income and National Production.
Industrial Policy of the Government.
Trade and Fiscal Policy of the Government.
Taxation Policy.
Licensing Policy etc.
Political Environment.
Social Factors.
Trend in labor and capital markets.
INVENTORY MANAGEMENT
It refers to stock of raw materials which a
firm keeps. If it is high, capital is
unproductively tide up which might, if stock
of inventory is reduced, be used for other
productive purpose . On the other hand, if
the level of inventory is low, production will
be hampered. Hence, managerial economics
with methods such as ABC analysis a simple
simulation exercise and some mathematical
models with a view to minimize inventory
cost.
ADVERTISING
Business economics helps in
determining the total
advertising cost and budget,
the measuring of economic
effects of advertising and form
an integral part of decision
making and forward planning.
RESOURCE ALLOCATION
Business economics with the
help of advanced tools such
as linear programming are
used to arrive at the best
course of action for the
maximum use of the available
resources and its substitutes.
RISK AND UNCERTAINTY ANALYSIS
As business firm have to operate
under conditions of risk and
uncertainty both decision making
and forward planning becomes
difficult. Hence business economics
helps the business firm in decision
making and formulating plans on the
basis of past data, current
information and future prediction.
OBJECTIVES OF BUSINESS ECONOMICS
1.To integrate economic theory with business
practice
2.To apply economic concepts and principles to
solve business problems
3.To employ most modern instruments and tools
to find solutions to business problems
4.To make optimum use of scarce resources of a
firm
5.To help in making overall development of a firm
6.To help the manager to understand the
intricacies of business problems and to make
right decision at the right time
ROLE

OF A BUSINESS ECONOMIST
The term role refers to the behavior and action exhibited by
a person in a given situation or environment.
1. To identify various business problems their causes and
suggest remedial measures.
2. To provide a quantitative base for decision making and
forward planning.
3. To act as a thinker.
4. To act as economic advisor to the firm.
5. To respond to the dynamic changes taking place in market
situation.
6. To conduct various types of research studies.
7. To synthesize various policies.
8. To have complete information about the environment
factors.
FUNCTIONS OF A BUSINESS
ECONOMIST
Two important functions of a business economist are
1. Decision making
2. Forward Planning
Decision making is essentially a process of selecting the best
out of many alternative opportunities that are open to
management. It is a management function and part of business
activity.
Forward planning refers to planning in advance for the future
that is deciding future course of action of a firm.
A business economist must be sufficiently intelligent enough to
think
In advance prepare a sound plan take all possible precautionary
measures to meet all types of challenges of the future business.
MICRO AND MACRO ECONOMICS
Prof. Ragnar Frisch coined these two terms in
economics These two terms are derived from
Greek words MIKROS meaning small and MAKROS
means large.
Micro Economics
Micro economics is that branch of economics that
deals with the study of the behavior and action of
only individual economic unit in detail.
Macro Economics
Macro economics is that branch of economics
which deals with the study of aggregate or
average behavior of the entire economy.
DIFFERENCE BETWEEN MICRO AND
MACRO ECONOMICS
MICRO ECONOMICS
1. It studies the small part
of the economy
2. It is a study of
individual units of the
economy
3. Partial picture of the
economy
4. It covers limited area of
study
5. It gives worms eye view
of the economy
MACRO ECONOMICS
1. It studies the large
part of the economy
2. It study the whole
economy
3. It gives total picture
of the economy
4. It covers a wider
scope
5. It gives us birds eye
view of the economy
CAREER OPPORTUNITIES
Market Research Analyst
Economic Consultant
Compensation and Benefits Manager
Actuary
Credit Analyst
Financial Analyst
Policy Analyst
Lawyer
Management Consultant
Business Reporter
Economics Majors Skills