1
INTRODUCTION
1.1 Meaning, Nature and
Scope of Business Economics – Micro and Macro
1.2 Basic Economic Problems
1.3 Market forces in solving
economic problems
1.4 Circular Flow of Income and
Expenditure
1.1 Meaning, Nature and Scope of Business
Economics – Micro and Macro
1.1.1 MEANING OF BUSINESS ECONOMICS
·
The simplest meaning of the word economics
is:
o
The branch of knowledge concerned with the
production, consumption, and transfer of wealth
o
The condition of a region or group as regards
material prosperity
o
A social science concerned chiefly with
description and analysis of the production, distribution, and consumption of
goods and services
·
There are many definitions of Economics under
Various Schools of Thought. The following chart summarizes them:
· In 1951 Joel Dean published a book entitled
"Managerial Economics." The subject Managerial Economics has gained
popularity.
· Managerial Economics reveals how
economic analysis is used to formulate the economic policies in respect to the
business firms.
· Managerial Economics was formerly known as
"Business Economics." It is also called as "Applied
Economics". The word Business Economics is formed from the two words Business and Economics
· Business economics is a field in Applied Economics which uses economic
theory and quantitative methods to analyze business enterprises and the factors
contributing to the diversity of organizational structures and the
relationships of firms with labour, capital and product markets
· Simply put Business economics is concerned
with economic issues and problems related to business organization, management,
and strategy.
·
Issues and problems include:
o
an explanation of why corporate firms
emerge and exist;
o
why they expand: horizontally, vertically and
spatially;
o
the role of entrepreneurs and
entrepreneurship;
o
the significance of organizational structure;
o
the relationship of firms with the employees,
o
the providers of capital,
o
the customers, the government;
o
the interactions between firms and the
business environment
1.1.2 NATURE OR CHARACTERISTICS OF BUSINESS ECONOMICS
- MICRO ECONOMIC IN NATURE :
o
Business Economics is Micro - economic in nature
o
It deals with the matters of a particular business firm only
o
The economy as a whole is not taken into consideration
·
USE OF ECONOMIC THEORIES:
o It largely uses the theory of markets and private enterprise
o Business Economics uses all economic theories relating to the
profits, distribution of income etc.
·
PRAGMATIC APPROACH:
o
Business Economics is a realistic science.
o
It studies all matters concerning business organization by
considering the real conditions existing in the business field
o
It avoids difficult abstract issues of economic theory
·
NORMATIVE SCIENCE:
o
Business Economics studies matters concerning the aims & objectives of a
business firm
o
It determines the methods to be adopted for achieving such
objectives
o
It also makes inquiry into the good and bad in decision making
o
Hence it is a normative science
·
USE OF MACROECONOMICS:
o
Macroeconomics is also useful to Business economics since it
provides an intelligent understanding of the business environment.
o
This understanding enables a business executive to adjust with the
external forces that are beyond the management’s control but which play a
crucial role in the well being of the firm.
o
Even though Business Economics has the nature of Microeconomics,
it also uses Macroeconomics approaches frequently
o
A business unit operates within some economic environment which is
in turn shaped by the behaviour of the economy as a whole
o
Certain matters in Macroeconomics like business cycles, national
income, public finance, foreign trade, etc. which are essential for Business
Economics
o
A business manager must know the external forces working over his
business environment
o
So, Business Economics uses the Macro Economics phenomenon for
taking business decisions
Thank you !!
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