INSTITUTE - USB

DEPARTMENT - BBA
Bachelor of Business Administration
Subject Name- Micro Economics
Subject Code- 22BAT-111
Faculty Name – Dr.Gurpreet Kaur (E6466)

DISCOVER . LEARN . EMPOWER

Topic – Nature and Scope of Economics
 Nature and Scope of
Economics
Course Objective
To review the dynamics of economy and its
application in modern day business.

Course Outcome

CO Number Title Level

CO1
To review the dynamics of economy and its Remembering
 
application in modern day business.
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 Table of Contents
S No. Contents Slide No.

1 Nature and Scope of Micro Economics 4-13

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 Nature of Micro Economics:
•Nature of Economics - Science or an Art
•Economics as a Science:
(a)
Science is a body of knowledge which shows relationship between cause and effect: Economics is a body
of generalizations or laws and like science shows cause and effect relationship. For e.g - The law of
demand in economics says “when price of a commodity rises (cause), its quantity demanded falls (effect).
(b) Science is capable of measurement: Like science, economics is also measured. For e.g. In economics,
measurement is in terms of money.
(c) Science has a methodological apparatus: Economics can also be studied using various methods For e.g.
Inductive Reasoning and Deductive Reasoning are the two methods of studying economics.
(d) Science has an ability to forecast: Like science, the various laws of economics can help in forecasting
which are beneficial for making policies. For e.g. - Consumer demand, supply of a product etc can be
predicted using various law
Economics as an Art:
(a) Art tells us how to do the thing i.e. to achieve a objective.
Economics is also used for achieving a variety of goals. For
e.g. All policies etc made in economics has the ultimate
objective of solving economic problems.
(b) (b) Art is the practical application of theoretical knowledge
Like Art, Economics also practices its theoretical laws. For
e.g. The various policies are made only after having a
theoretical knowledge of the society and country as a whole.
Hence, economics is also an art
Economics as a Positive or Normative Science:
“Economics is a science and economics is a positive science mean the same
thing” “Economies as an art and normative economics means two related but
different things” Let us see what is positive/normative science:

 Positive Economics:
• It investigates “what is”. It does not pass value judgements.
• It is not concerned with welfare propositions.
• This approach of economics was propounded by Lionel Robbins.

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 Normative Economics:
• Normative is derived from the word “Norm” or “Standard” which implies
“what ought to be”. It passes value judgements.
• It is concerned with welfare propositions. It decides standards which should
be adhered to in achieving economic objectives.
• This approach was propounded by Alfred Marshall.

On the basis of the above arguments and facts, it can be said that:
• Micro economics is a blending of positive science with normative
science.
• It is positive when it is confined to statements about causes and effects
and to functional relationships of economic variables.
• It is normative when it involves norms and standards, mixing them with
cause and effect analysis 7
 Scope of Micro Economics:

Economics has two major branches namely

Microeconomics and Macroeconomics and both are applied
to business analysis and decision-making directly or
indirectly.
The areas of business issues to which economic theories can
be applied may be broadly divided into the following two
categories:
•Operational or Internal issues; and
• Environmental or External issues
Micro Economics Applied to Operational Issues

Operational problems are of internal nature. They arise within

the business organization and fall within the preview and
control of the management. Some of the important ones are:
• Theory of demand
• Theory of production and production decisions
• Analysis of market structure and pricing theory
• Profit analysis and profit management
• Theory of capital and investment decisions

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Macro Economics Applied to Business Environment

Environmental issues relate to general environment in which business

operates. They are related to overall economic, social and political
environment of the country. The following are the main ingredients of
economic environment of a country :
• Issues related to Macro Variables
• Issues related to Foreign Trade
• Issues related to Government Policies

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Summary:

Economics is a Science and Art

Economics is Positive and Normative Science
Economics has a wide scope