Business Economics covers most of the problems that a manager or establishment faces. Hence, the scope of business economics is wide. Since a firm can face internal/operational as well as external and/or environmental issues, there are different economic theories applicable to them. Microeconomics helps with internal or operational issues whereas macroeconomics is applied to external or environmental issues. In this article, we will look at the scope of business economics under both these heads. 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.
Characteristics of Business Economics
To comprehend the vast scope of business economics, it is important to understand the salient features of this imperative branch of Applied Economics. Take a look at the following characteristics of Business Economics:
- It mainly deals with the decision-making process in a business enterprise and that’s why the unit of study in Business Economics is referred to as the business enterprise or firm we are studying.
- It is microeconomic in nature because it mainly deals with various business aspects like consumer behaviour, price determination of a commodity, profit levels, revenue, etc.
- The major economic principles and concepts used in Business Economics include the theory of the firm, production and cost analysis, resource allocation, profit analysis, etc.
- Along with assessing how and why businesses operate and carry out the optimum allocation of resources, price determination, etc. but it also studies the implications and consequences of their actions and policies.
Scope and 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 is large. There are two branches in Business Economics, namely Microeconomics, which deals with the internal matters of a firm, and Macroeconomics which studies the external factors.
Objectives Of Business Economics:
- Profitability – This is one of the most important objectives of business. We normally setup business to achieve profits for its owner or shareholders. But, does it mean that business should somehow, by hook or crook, earn the profit? Our answer is no; it should earn profit by working under rules and regulations or by following ethical practices.
- Growth – Another important objective of business is to achieve growth. The growth should be in terms of increase in profit, revenue, capacity, number of employees and employee prosperity, etc.
- Stability – Stability means continuity of business. An enterprise or business should achieve stability in terms of customer satisfaction, creditworthiness, employee satisfaction etc. A stable organization can easily handle changing dynamics of markets.
- Efficiency – An efficient or aggressive working environment. A business should always try to achieve the best in its field. Efficiency is considered in terms of labor productivity, energy consumption, quality control etc.
- Survival – A business should have the capability to survive markets jolts or shocks. A business should be there with a vision of long-term existence.