Business economics: application of economic theory in solving business problems.
Business economics deals with various micro and macroeconomic tools and whose analysis can be used in managerial decision making to solve business problems. Microeconomic tools used in this topic include demand analysis, production and cost analysis, break-even analysis, pricing theory and practice, technical progress, location decisions, and capital budgeting. Macroeconomic concepts that are directly or indirectly relevant to managerial decision making, including analysis of national income, business cycles, monetary policy, fiscal policy, central banking, public finance, economic growth, international trade , the balance of payments, free trade protectionism, exchange rates and the international monetary system.
The scope of this managerial science is wide and has close connections with economic theory, decision sciences and accounting. Traditional economics talks about theory and methodology, while business economics applies economic theory and methodology to solve business problems. Use analysis tools and techniques to provide optimal solutions to business problems.
- Relationship with the economy:
Business economics borrows concepts from economics just like engineering from physics and medicine from biology. The analysis of both micro and macroeconomic concepts adds valuable contributions to the organization. Let’s say that the national income forecast is an important aid for the analysis of the business situation, which, in turn, could be an invaluable input for forecasting the demand for specific groups of products. Market structure theories can be analyzed for the purpose of market segmentation.
- Relationship with decision sciences:
Decision models are created to format solutions for problem situations, and the process uses techniques such as optimization, differential calculus, and mathematical programming. This also helps to analyze the impact of the alternative course of action and evaluate the results obtained from the model.
- Relationship with accounting:
Financial data and statements are the language of business. The accounting profession greatly influences cost and revenue reporting and its classification. Therefore, a manager must be familiar with the generation, interpretation, and use of accounting data. Furthermore, accounting is seen as a managerial decision tool and no longer as a primary bookkeeping practice. Accounting concepts and practices can be very well applied to improve the economic scope of a project.
Economics is an interesting subject as it deals with the everyday problems of a common man and at the same time cares about the economic prosperity of a country as a whole. Its main focus is on the allocations of scarce resources among competing ends. Individuals, companies, and nations face resource allocation problems. Managerial economics can be viewed as economics applied to problem solving at the firm level.