In life, everyone wants an infinite number of things but we only have finite resources to acquire what we want. Maintaining an efficient balance between these unlimited wants and limited resources is what Business Economics deals with. Therefore, understanding the Meaning of Business Economics is extremely crucial. But when we are talking about business economics we consider the needs of a bigger entity, for example, a nation, a firm, etc.
Meaning of Business Economics
To understand the meaning of business economics we can think of Business Economics as the integration of two major concepts: Economic Theory + Business Practices. It helps in making the best decision based on the analytical tools of Economic Theory and best-suited Business Policies defined within Business Practices.
Browse more Topics under Introduction To Business Economics
- Nature of Business Economics
- Scope of Business Economics
- Basic Problems Of An Economy
- Capitalist Economy
- Socialist Economy
- Mixed Economy
- Role Of Price Mechanism
It consists of various techniques such as demand-supply, cost, and consumption to analyse all aspects of a business situation. Also, it provides us with the past and present information regarding the growth in production and demands.
It is because of Economic Theory that we know that both Quantity and Quality of Resources whether Human or Non-human has improved with time. But what it fails to clarify is the reason behind a non-smooth growth pattern. This is where Business Economics comes into play.
Business Economics gives information about the elements that affect (increase or decrease) the production efficiency of resources. It helps to examine economic issues for selecting the best course of action from all the ones available.
This course of action directly influences the performance of a business. So, it is important to make a sound decision. This brings us to our next vital point of focus, Decision Making.
In Business, allocation of resources is a very crucial task. And, there are always several alternatives (recipients of the resources) present. Now Evaluating all the alternatives based on the information collected and choosing the most efficient one is nothing but Decision Making.
An economic issue becomes more complex because it is based on political and social issues as well. Making a decision is again challenging because we make a decision on the basis of non-exact knowledge with an uncertain future.
In such cases, the best that we can do from our side is making the management to acquire the data known as accurately as possible. For this, management needs to be provided with precise tool exact analytical methodologies.
As redressing the Management is also a part of decision making, Business economics is also called Managerial Economics.
More to know about Business Economics:
It is a part of Applied Economics. Apart from Economic theory and Business Practices, Business Economics encompasses the following fields of study too:
- Operations research
- Theory of decision making
The quantitative techniques that are used:
- Capital Budgeting: analysing the worth of a firm’s long-term investments.
- Cost Analysis: to examine the pros and cons of an aspect of a business and determining the best one.
- Regression Analysis: to find a relationship between two important variables statistically.
- Break-Even Analysis: determining the optimum sales targets to be reached within a given duration of time to even out the cost of doing business.
- Linear Programming: techniques to optimise a business value such as output or cost.
Solved Question on Meaning of Business Economics
Question: Which two major fields of study constitute business economics?
Answer: Business economics is developed based on the principles of the subjects ‘Economic Theory’ and ‘Business Practices’.