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MEANING OF BUSINESS ECONOMICS

Managerial economics is a science that deals with application of the various economic theories, concepts, principles, and the techniques to the business management in order to solve the business and management problems. It deals with practical application of the economic methodology and theory to the decision making problems faced by the public, private and the nonprofit making organizations. According to the Lord Robins, "Economics is the science which studies the human behavior as a relationship between the ends and the scarce means which have the alternative uses". According to the Spencer And Siegel man "Business Economics is integration of the economic theory with the business practice for the purpose of facilitating the decision making and forward planning by the management".

IMPORTANCE OF BUSINESS ECONOMICS

The Business economics is an particularly important matter. And should be of the high concern for people in both the large and small firms. The discipline allows you to better understand the markets and the potentially theorize a manipulation formula to better income in said firm. While it can increase the profits in firm it should not be distinguished as only the method of production. As there are many different subjects which do need to be focused on as well as the business economics. The Business Economics would allow the individuals to spot the economic bubbles as well and make needed changes in their own firm. For example housing market crash of 2008 was cause of an economic bubble which was not due to any one individual or the corporation, but was consequences of what sometimes happens in market. The same type of even happened with Dutch tulips centuries ago. This believe it or not traded for what would be millions of dollars today. Although, it is hard to clutch that an individual would pay for such a thing. Eventually, people trapped on and the tulips as well as the rich individuals and the people saw their incomes drop. If a person were to spot this in their investment and know this factor in the business economics they could divide themselves from bubble and the failure. Maybe not entirely as market could somehow reflect on them, but not enough to lose all the income, and become extremely bust.

WHY IS ECONOMICS SO IMPORTANT TO A BUSINESS?

To determine whether they are making a profit or loss. By determining the price elasticity of the demand they can make the optimum choices on whether to increase or decrease price. It also helps to use available production resources in an efficient and the most limited way.

CHARACTERISTICS OF BUSINESS ECONOMICS

1. Micro Economic Nature: Business Economics is the micro economic in its nature because it deals with the matters of a particular business firm only.

2. Use of Economic Theories: The Business Economics uses all the economic theories relating to profits, the distribution of income etc.

3. Realistic One: The Business Economics is a practical science. It studies all the matters concerning the business organization by considering real conditions existing in business field.

4. Normative Science: The Business Economics is a normative science. It studies matters concerning the aims and the objectives of a business firm. It determines methods to be adopted for achieving the objectives. It also makes enquiry into good and bad in the decision making. Thus it is a normative science.

5. Macro-Economic Uses: Even though the Business Economics has nature of the Micro-Economics, it also uses the Macro-Economic approaches recurrently. The Certain matters in the Macro-Economic like Business Cycles, Public Finance, National Income, the Foreign trade etc. are important for the Business Economics. So, the Business Economics uses macro-economic phenomenon for taking the business decisions.

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

NATURE AND SCOPE OF BUSINESS ECONOMICS

The scope of the Business Economics consists of the following:

1. Demand Forecasting: The Demand forecasting is an important topic studied in the Business Economics. Every business firm continues and initiates its production process on basis of anticipation of more demand for its goods in future. It makes the research and conducts the market survey with a view to know tastes and fashions of consumers. It pools up resources and starts the production for meeting future demand. The Business Economics analyses demand behavior and forecasts quantity demanded by the consumers.

2. Cost Analysis: The Business Economics deals with analysis of the different costs incurred by business firms. Every firm desires to minimize its costs and enlarge its output by securing the several economies of the scale. But it does not know in advance about exact costs involved in the production process. Business Economics deals with cost estimates and acquaints entrepreneurs with t cost analysis of their firm.

3. Profit Analysis: Every business firm aims to secure the maximum profits. But at the same time it faces the uncertainty and risk in getting the profits. It has to build innovations in the production and the marketing of its goods. Business Economics deals with matters relating to the profit analysis like profit techniques, break-even analysis and policies.

4. Capital Management: The Capital management is another topic dealt in the Business Economics. It denotes the planning and the control of capital expenditure in the business organization. It studies matters like rate of return, cost of capital, selection of best project etc.

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