What is business 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. A
PROFESSIONAL FOCUS OF THE JOURNAL BUSINESS ECONOMICS HAS BEEN EXPRESSED AS
PROVIDING “PRACTICAL INFORMATION FOR PEOPLE WHO APPLY ECONOMICS IN THEIR
BUSINESS ECONOMICS IS AN INTEGRAL PART OF TRADITIONAL ECONOMICS AND IS AN
EXTENSION OF ECONOMIC CONCEPTS TO THE REAL BUSINESS SITUATIONS. IT IS AN
APPLIED SCIENCE IN THE SENSE OF A TOOL OF MANAGERIAL DECISION-MAKING AND
FORWARD PLANNING BY MANAGEMENT. IN OTHER WORDS, BUSINESS ECONOMICS IS
CONCERNED WITH THE APPLICATION OF ECONOMIC THEORY TO BUSINESS MANAGEMENT.
BUSINESS ECONOMICS IS BASED ON MICROECONOMICS IN TWO CATEGORIES: POSITIVE
Definition of Business Economics by
The person who studies and acquires the concepts of Business Economics and helps the
organization in forwarding planning and decision making is a Business Economist. He/she
is the one who helps an organization to cope with the dynamic world.
Globalization, changes in business cycles, the uncertainty of business are some problems
faced by the management of an organization. Business Economics aids the management
in making decisions under the conditions of uncertainty. The complex problem of
economizing scarce resources can be solved with the help of principles of business
The National Association for Business Economics (NABE) is one of the largest international
associations of applied economists, academics, strategists, and policy-makers who are
dedicated to the effective application of economics.
Who is business economist
The person who studies and acquires the concepts of Business Economics and helps
the organization in forwarding planning and decision making is a Business Economist.
He/she is the one who helps an organization to cope with the dynamic world.
Globalization, changes in business cycles, the uncertainty of business are some
problems faced by the management of an organization. Business Economics aids the
management in making decisions under the conditions of uncertainty. The complex
problem of economizing scarce resources can be solved with the help of principles of
The National Association for Business Economics (NABE) is one of the largest
international associations of applied economists, academics, strategists, and policy-
makers who are dedicated to the effective application of economics.
Importance of business economics
The branch of Business Economics covers all the issues which any business owner
or firm can face concerning the management of the organization. Several factors
can affect the working of a business, ranging from internal matters to external
issues such as the environment. Since this branch of study covers a wide spectrum
of possibilities in business management, we can say that the scope of the subject
There are two branches in Business Economics, namely Microeconomics, which
deals with the internal matters of a firm, and Macroeconomics which studies the
In this article, we will go through both these sections and understand the scope
and importance of Business Economics.
Types of business economics
1. Managerial Economics
It refers to a field of study within business economics that is supposed to pay heed to the microeconomic factors crucial in influencing
the decision-making processes with an organization. Its principles are intended for influencing and guiding corporate strategy and
decisions for optimizing the outcomes of a company. In the business world, managerial economics plays a key role in using all
available resources within an organization to maximize production and minimize any waste.
2.Business Economics for Nonprofit and for-profit Organizations
Business economics helps these organizations in limiting their waster and maximizing the use of their available resources to optimize
their presence as successful enterprises. It assists them in maintaining the necessary capital for continuing working within the
3.Business Economics in Demand Analysis
Demand is the basis of all business activities. It is essential for business planning, and it occupies a strategic role in business
economics. It consists
Determinants of demand
Elasticity of demand
3.in Profit Management
In the long run, profit is the chief measurement of business success. Profit management
constitutes a problematic area in business economics. It covers the study of various models to
maximize profit in business.
4. In Capital Budgeting
Capital budgeting implies the planning and controlling of capital expenditure. The topics covered
under this are- selection of a project, rate of return, cost and capital, etc.
5. In National Income Analysis
Business economics covers the study of national income and the economic environment prevailing
in a country. The national income and the per capita income are the factors that affect the
business decision. This study helps understand the changes in the behavior of a firm.
Scope of business economics
1. In Cost Analysis
Cost is the expenditure undertaken by firms for getting output. Studying costs
from the firm’s records can be helpful for decision-making and effective planning.
The aspects covered under this are- production function and cost output relations.
2. In Price Policies
Price is the basis of the revenue of the firm. The success of the firm depends on
correct pricing decisions. The topics covered are- market and types of demand,
price determination in all forms of need, and price forecasting.
Features of business economics
Business Economics is microeconomic as it includes studying the economic conditions
of a firm and its managerial problems. It consists of the study of profit theories and
analysis of demand-supply, cost-revenue, equilibrium, production, pricing, costing,
marketing, sales, profit, capital management, business interest, etc. It deals with the
determinants of the business environment, which are helpful for decision-making.
It is prescriptive as it helps the manager in decision-making as it is concerned with
what decision the manager will be making. It bridges the gap between economic
principles and business practices as business economics helps managers make
decisions rationally by applying various economic principles. It covers the study of
methods and analysis of the economic tenets for evolving business policies, planning,
Business Economics is also called managerial economics. It involves the
application of economic theory and practice to business. In business, decision-
making is very important. Decision-making is a process of selecting one course of
action out of available alternatives.
Thus business economics serves as a link between economic theory and decision-
making in the context of business. The scope of business economics contains
demand analysis, cost analysis, price policies, profit management, capital
budgeting, and national income analysis.
The main objectives of business economics are to reduce risk and uncertainty,
help in decision making, and help in the smooth functioning of the management
of the organization.