Business economics is the branch of economics, it the
applied science in the business for better decision making under managerial
performance. Business economics pertains for cost effectiveness which directly
makes the business more competitive and helps in marketing bargaining. It
provide social benefits by employment as the nations are converting into capitalism;
as per ‘Keynes’ theory private business
pertains full employment by investment which led to production and competitive
market and enriches employment, it helps in profit and wealth maximization and
effective understanding and use of legal economic policies of nations.
Business is based on identification of product, place so
business economics is normative science which explains facts and justifies
them. Normative economics refers to ‘what ought to be’.
The whole business economics revolves to; demand analysis,
cost analyze, pricing decisions, profit management, capital management,
product, sale, market, linear programming and theory of game.
So the whole work will count the scientific facts of
economics and integrate it with decisions of business which leads it to better
prospective growth and development.
As commerce is huge and complex streams the first question
is ‘why’ what’s the reason for business economics; the fact lies in the
business’s factors which are want, needs, desire, scarce resources, alternative
use of resources.
Thus simply it pertains to solve the business problems and
determine business politics.
Need and wants are those element which pertain to be
foundation of any industry, firm and product, needs and wants are never ending
process as when a one need is attained we secure another in this way it is
continuous and we can say one need gives birth to another need. Therefore such
fundamental issues led to industrial revolution and competitive business where
number of firms and products are competating one another to sell to final
consumer with ability of satisfaction of wants. In this way human had drastic
and speculative growth of development as competition is growing besides human
satisfaction has led humans towards scarcity.
All most every resource is scare by its nature and
characteristics and in this midst human needs are growing more and more and
earth is shrinking from its recourses as they are been continuously degraded
and exploited. In theoretical sense it has created sense of responsibility on individual,
companies, government to look after the earth and resource which alternatively
established the theory of sustainable development whereby the demand and growth
is not been compromised but parallel due care of resources and conservation is
been done.
Modern world has become much more integrated economically
and is much depended on global issues and factors, so the uses of business
economics helps in effective utilization of resources as it determines what,
why, for, whom to produce and procures vision and analysis on every factor’s
price on supply and demand. It envisages full employment; Keynesian’s general
theory of employment tells that if investment and effective demand will
increase only after this employment can increase. Therefore government is
taking steps for self-employment and grants various schemes and subsidies in
order to grow employment in country. It helps in maximization of profit and
wealth of business whereby the techniques and efficient economy helps business
to minimize cost which substantially helps to raise higher profits. It also
helps business to be vigilant and makes it accomplish legal norms which direct
helps business to prosper and procure better profit and brand oriented firms.
The main characteristics of business economics are;
1.
Normative science
2.
Applied economics
3.
Decision making oriented
4.
Managerial decision and performance
5.
Based on macro and micro economics
6.
Counting the facts with justification
7.
Solving problems methods and approach
8.
Economics of firm
9.
Coordinating nature
10.
Science as well as arts
an economics can be nature of either normative or positive as business
economics is normative science which refers to “what ought to be” thus it means
imagination of anything which must be as such as perceiver which create a
dynamic integration of recourse of firm to fulfill the desire of economist.
While as positive science to “what is“, thus it means to be what is or looking
on grass root of economy.
As so far we have come across the definition, uses, nature
and characteristics of business
economics now we shall analyze what is it scope as its main purpose is decision
making, therefore we we comprehend its scope as following.
1.
Demand analyses; business depends on demand of
product on a specified time on specific price therefore business has to
analyses and estimate demand for forecasting and manipulation and comprehend
the determinants, distinctions. Thus we came to analyze in first sphere of
business the firm has to look after it variables and factors which directly
determine it cost effectiveness and competitiveness.
2.
Production and cost analyses is 2nd
phase where economics helps business to understand and diagnose cost analyses
which helps in cost control and boosts more production. As less expense are
made on making goods or services more profit and competitive can business
become which is elemental for survival of business.
3.
Pricing decisions phase refers to the ability
and policy of business. It helps managers to estimate and determine a accurate
pricing structure which matches the wants and market trends of economy. Pricing
is crucial than cost control because cost control is process while as price is
policy. In an India like economy price is basic issue for the sale and purchase
of goods and services. Price is the basic for the revenue for business. Some of
the aspects of pricing problems are price determination in various market
forms, methods, differential pricing, product line pricing and price
forecasting.
4.
Profit management phase is concluded after above
phase when revenues are collected and profit is determined. As the main
objective of business is to earn profit. But there is uncertainty about profits
due to its variation in costs and revenue. Thus it secures to manage profits
and utilization with proper and efficient profit planning.
5.
Capital management is very crucial aspect of
management and economics of business it deals with planning and control of
capital and cost of capital with all its aspects.
6.
Product, sales, market promotion and strategy
are the key drivers for determining the success and failure of any business,
therefore business economics provide adequate measure to managers to take any
decision in the interests of business
7.
Linear programming and theory of game is a
contemporary and research approach by business.
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