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Business
Economics
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Economics
It is defined “ as a social science which covers the actions of individuals and groups of individuals in the process
of producing, exchanging and consuming of goods and services to achieve optimization of resource use”

1. Production Decisions
2. Exchange Decisions
3. Consumption Decisions

According to Lord Robins,” Economics is the science between studies human behavior as relationship between
ends and scarce means which have alternative uses”

Business Economics
It deals with the decision making and forward planning in uncertainty and integrates economic theory with
business practice for the purpose of facilitating decision-making and forward planning by management. It is a
science that deals with the application of various economic theories, principles, concepts and techniques to
business management in order to solve business and techniques to business management in order to solve
business and management problems.

According to SPENCER AND SIEGELMAN “ Business economics is the integration of economic theory with
business practice for the purpose of facilitating decision making and forward planning by management.”
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CHARACTERISTICS OF BUSINESS ECONOMICS

1. Micro Economics : Business economics is micro economics in its nature because it deals with
matters of a particular business firm only.
2. Use of Economics theories: Business economics uses all theories relating to the profits ,
distribution of income etc.
3. Realistic One: Business Economics is a realistic science . It studies all matters concerning
business organization by considering the real conditions existing in the business field.
4. Normative Science: Business Economics is a normative science. It studies the matters
concerning the aims and objectives of a business firm. It determines the methods to be adopted for
achieving such objectives. It also makes enquiry into the good and bad in decision making. Hence
it is normative science.
5. Macro-Economics Uses: Even though Business Economics has the nature of micro-economics,
it also uses Macro-Economics approaches frequently . Certain matters in Macro- Economics like
Business cycles, National income ,Public finance ,Foreign trade etc. are essential for Business
Economics . So , Business Economics uses the macro-economic phenomenon for taking
business decision.
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6. Economics is a science or an art

● It is considered as science if it a systemized body of knowledge which studies the relationship
between cause and effect.
● Art is nothing but practice of knowledge.
● Where as science teaches us to know and art teaches us to do.
● It is science in which methodology and art in its application.

NATURE AND SCOPE OF BUSINESS ECONOMICS

The scope of Business Economics consists of the following:

1. Demand Forecasting: Demand forecasting is an important topic studied in business economics.
Every business firm initiates and continues its production process on the basis of the anticipation of
more demand for its goods in the future. It makes research and conducts market survey with a view
to know the tastes and fashions of the consumers.
2. Cost Analysis: Business Economics deals with the analysis of different cost incurred by the
business firms. Every firm desires to minimize its cost and increase its output by securing several
economies of scale.
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3. Profit Analysis: Every business firms aims to secure maximum profits. But at the same time it faces uncertainty
and risk in getting profits.
4. Capital management: Capital management is another topic dealt in Business Economics. It denotes planning
and control of capital expenditure in business organization.

IMPORTANCE OF BUSINESS ECONOMICS

Business Economics is a useful subject. In Fact it is the most significant of all social sciences. Its study is highly
useful for analyzing and understanding the various economic problems.

THEORETICAL SIGNIFICANCE

1. Understanding Economic Behavior

The study of business Economics helps us to understand the economic behavior of human beings.

2. Working of the Economic System

Business economics explains the condition which influence the progress of the economy. It makes suggestions
for overcoming for complicated problems faced by the people and the government.

3. Economic Planning
Economic planning is an important branch of economics. Economics provides a good knowledge of information
regarding the techniques of economic planning.
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4. Prediction
Business Economics serves as the best means for predicting the economics events. It helps us to predict the
consequences of various economic phenomena.

5. Ethical Value
Business Economics inculcate certain ethical norms like honesty, responsibility, and adjustability etc. it upholds
the moral and cultural values of individuals. It makes them honest citizens.

PRACTICAL SIGNIFICANCE
PRACTICAL SIGNIFICANCE

6. Useful to the finance Minister

The study of Business Economics is highly useful to the finance Minister and the personnel working in the
finance department. It provides a good knowledge about public revenue, public revenue, public debt and public
expenditure. It helps them in forming a sound financial policy and result oriented budget.

2. Useful to the Minister for Planning

The study of Business Economics is also useful to the Minister for planning and his personnel. It furnishes a
good knowledge about the various types of plans, plan implementation, capital output ratio, investment strategy etc.
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3. Useful to bankers
Business economics is also useful to the bankers. It enables them to understand the nature, purpose and
implications of different economic policies implemented by the business firms.

4. Trade Unions Leaders

Knowledge of business Economics is also significant for the trade union leaders. They study of Business
Economics helps the trade union leaders to understand the nature and causes of industrial disputes, wage problem
etc.
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Prepared by:
JONALYN G. GASPAR, LPT