Scribd
Upload
22 views3 pages

Scope of Business Economics-converted (1)

Business economics is an applied field that examines the financial, organizational, and market issues faced by corporations, utilizing economic theory and quantitative methods. Its scope includes microeconomic analysis of operational issues like demand forecasting, production and cost analysis, inventory management, and pricing policies, as well as macroeconomic factors that affect business performance such as economic systems and government policies. Understanding these aspects helps firms make informed decisions to optimize operations and mitigate risks.

Uploaded by

akshayraj0876
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
22 views3 pages

Scope of Business Economics-converted (1)

Business economics is an applied field that examines the financial, organizational, and market issues faced by corporations, utilizing economic theory and quantitative methods. Its scope includes microeconomic analysis of operational issues like demand forecasting, production and cost analysis, inventory management, and pricing policies, as well as macroeconomic factors that affect business performance such as economic systems and government policies. Understanding these aspects helps firms make informed decisions to optimize operations and mitigate risks.

Uploaded by

akshayraj0876
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Course: BBA Part I

Paper: IV
Topic: Scope of Business Economics
Teacher’s Name: Prof. (Dr.) Reyazuddin
School: Commerce and Management
Date: 27/06/2020

Scope of Business Economics

What Is Business Economics?


Business economics is a field of applied economics that studies the financial, organizational,
market-related, and environmental issues faced by corporations. Economic theory and
quantitative methods form the basis of assessments on factors affecting corporations such as
business organization, management, expansion, and strategy. Studies might include how and
why corporations expand, the impact of entrepreneurs, the interactions among corporations, and
the role of governments in regulation.

The Scope of Business Economics


I. Microeconomics Applied to Operational Issues
As the name suggests, internal or operational issues are issues that arise within a firm and are within
the control of the management. It is within the scope of business economics to analyze this.

Further, a few examples of such issues are choice of business, size of business, product designs,
pricing, promotion for sales, technology choice, etc. Most firms can deal with these using the
following microeconomics theories:

1. Analyzing Demand and Forecasting


Analyzing demand is all about understanding buyer behavior. It studies the preferences of
consumers along with the effects of changes in the determinants of demand. Also, these
determinants include the price of the good, consumer’s income, tastes/ preferences, etc.

Forecasting demand is a technique used to predict the future demand for a good and/or service.
Further, this prediction is based on the past behavior of factors which affect the demand. This is
important for firms as accurate predictions help them produce the required quantities of goods at the
right time.

Further, it gives them enough time to arrange various factors of production in advance like raw
materials, labor, equipment, etc. Business Economics offers scientific tools which assist in
forecasting demand.

2. Production and Cost Analysis


A business economist has the following responsibilities with regards to the production:
• Decide on the optimum size of output based on the objectives of the firm.
• Also, ensure that the firm does not incur any undue costs.
By production analysis, the firm can choose the appropriate technology offering a technically
efficient way of producing the output. Cost analysis, on the other hand, enables the firm to identify
the behavior of costs when factors like output, time period, and the size of plant change. Further, by
using both these analyses, a firm can maximize profits by producing optimum output at the least
possible cost.

3. Inventory Management
Firms can use certain rules to reduce costs associated with maintaining inventory in the form of raw
materials, work in progress, and finished goods. Further, it is important to understand that the
inventory policies affect the profitability of a firm. Hence, economists use methods like the ABC
analysis and mathematical models to help the firm in maintaining an optimum stock of inventories.

4. Market Structure and Pricing Policies


Any firm needs to know about the nature and extent of competition in the market. A thorough
analysis of the market structure provides this information. Further, with the help of this, firms
command a certain ability to determine prices in the market. Also, this information helps firms
create strategies for market management under the given competitive conditions.

Price theory, on the other hand, helps the firm in understanding how prices are determined under
different kinds of market conditions. Also, it assists the firm in creating pricing policies.

5. Resource Allocation
Business Economics uses advanced tools like linear programming to create the best course of action
for an optimal utilization of available resources.

6. Theory of Capital and Investment Decisions


Among other decisions, a firm must carefully evaluate its investment decisions an allocate its capital
sensibly. Various theories pertaining to capital and investments offer scientific criteria for choosing
investment projects. Further, these theories also help the firm in assessing the efficiency of capital.
Business Economics assists the decision-making process when the firm needs to decide between
competing uses of funds.

7. Profit Analysis
Profits depend on many factors like changing prices, market conditions, etc. The profit theories help
firms in measuring and managing profits under such uncertain conditions. Further, they also help in
planning future profits.

8. Risk and Uncertainty Analysis


Most businesses operate under a certain amount of risk and uncertainty. Also, analyzing these risks
and uncertainties can help firms in making efficient decisions and formulating plans.
II. Macroeconomics applied to Environmental Issues
External or environmental factors have a measurable impact on the performance of a business. The
major macroeconomic factors are:

• Type of economic system


• Stage of the business cycle
• General trends in national income, employment, prices, saving, and investment.
• Government’s economic policies
• Performance of the financial sector and capital market
• Socio-economic organizations
• Social and political environment.
The management of a firm has no control over these factors. Therefore, it is important that the firm
fine-tunes its policies to minimize the adverse effects of these factors.

You might also like