Business Economics
Definition:
Application of Economic theory in business for cost minimization and profit
maximization is called business Economics.
Integrating Economic models in business for profit formulation and for profit
making is called business Economics.
It is a science which deals with demand forecasting and forward planning o
avoid business risk for profit maximization.
1. Nature and scope of business economics:
Introduction:
Business Economics is micro economics. It is normative Economics too. It is applied
Economics . Business Economics deals with solutions for problems. It is growing
science. It talks about business problems and the solutions for the problem.
Scope of Business Economics:
Cost Minimisation:
Every businessman worried about the cost. He works day and night and night and daty
for how to reduce the cost. Profit of an organization largely depends upon the cost of
production. If cost is low, prices can be reduced. If prices are reduced sales can be
increased. If sales is maximum, Profit will also be maximum.So cost minimization is
the first scope of business Economics.
Decision making Economics:
A business man becomes successful when he answers the following five questions.
1. What to produce?
2. How to produce?
3. To whom it should be produce?
4. Where it should produce?
, 5. When it should produce?
These are the fundamental problems in any business activity. Need to be answered.If a
businessman answers the above questions then he is a successful businessman. This is
called decision making in business.
Demand forecasting:
Estimating future demand on the basis of present and past sales is called demand
forecasting. A business Economist must do this to know the future demand. So that he
can decide the level of investment to be done in business.
Product Development:
A product is nothing but bundle of utilities. The consumers expect more the
producers. It becomes necessary to improve the product by improving utility. Profit
depends upon product development .
Pricing:
Price of a product plays an important role in business. Many a times a product fails in
a market not because of its quality. but because of its price. so fixing the price is the
most difficult job in businesss, Price must be fixed on the basis of competition,
consumer income, nature of consumer. So the price decides profit.
Capital budgeting:
Today business are called big business. It needs huge capital for investment. Either it
should be borrowed or it must be raised by selling the product shares. While investing
money becomes necessary to find out the best investment. The best investment is that
investment which brings more revenue to the firm and more dividends to the share
holders. This is called capial budgeting.
Profit Planning:
The business Economist always try to find out the break even point. At the break even
point , the firm earns neither loss nor profit. This point is also very much important
that the profit of the organization starts only from the point.
Break even Analysis:
Definition:
Application of Economic theory in business for cost minimization and profit
maximization is called business Economics.
Integrating Economic models in business for profit formulation and for profit
making is called business Economics.
It is a science which deals with demand forecasting and forward planning o
avoid business risk for profit maximization.
1. Nature and scope of business economics:
Introduction:
Business Economics is micro economics. It is normative Economics too. It is applied
Economics . Business Economics deals with solutions for problems. It is growing
science. It talks about business problems and the solutions for the problem.
Scope of Business Economics:
Cost Minimisation:
Every businessman worried about the cost. He works day and night and night and daty
for how to reduce the cost. Profit of an organization largely depends upon the cost of
production. If cost is low, prices can be reduced. If prices are reduced sales can be
increased. If sales is maximum, Profit will also be maximum.So cost minimization is
the first scope of business Economics.
Decision making Economics:
A business man becomes successful when he answers the following five questions.
1. What to produce?
2. How to produce?
3. To whom it should be produce?
4. Where it should produce?
, 5. When it should produce?
These are the fundamental problems in any business activity. Need to be answered.If a
businessman answers the above questions then he is a successful businessman. This is
called decision making in business.
Demand forecasting:
Estimating future demand on the basis of present and past sales is called demand
forecasting. A business Economist must do this to know the future demand. So that he
can decide the level of investment to be done in business.
Product Development:
A product is nothing but bundle of utilities. The consumers expect more the
producers. It becomes necessary to improve the product by improving utility. Profit
depends upon product development .
Pricing:
Price of a product plays an important role in business. Many a times a product fails in
a market not because of its quality. but because of its price. so fixing the price is the
most difficult job in businesss, Price must be fixed on the basis of competition,
consumer income, nature of consumer. So the price decides profit.
Capital budgeting:
Today business are called big business. It needs huge capital for investment. Either it
should be borrowed or it must be raised by selling the product shares. While investing
money becomes necessary to find out the best investment. The best investment is that
investment which brings more revenue to the firm and more dividends to the share
holders. This is called capial budgeting.
Profit Planning:
The business Economist always try to find out the break even point. At the break even
point , the firm earns neither loss nor profit. This point is also very much important
that the profit of the organization starts only from the point.
Break even Analysis:
