Current News
Implications of this news
Take–away of today’s lecture
1. Concept of Business Economics
2. Forms of Economic Analysis
Lecture Outcome
1. Enabling the students to understand the
concept of Business Economics and
making them identify the difference
between traditional economics and
business economics.
2. Making the students aware about various
forms of economic analysis
Business Economics
• Another name is Managerial Economics
• Involves application of economic theory
and methodology to business.
• Siegelman has defined business economics
as “the integration of economic theory with
business practice for the purpose of
facilitating decision-making and forward
planning by management.”
Features of Business Economics
•New discipline and of recent origin
•Highly specialized and separate branch of
economics
•Study of allocation of resources
•Study of decision making
•Normative science
Functions of a Business
Economist
Two important functions of a business
economist are
1.Decision making
2.Forward Planning
Polling question
The word that comes from the Greek word
for “one who manages a household is
a. Market
b. Consumer
c. Producer
d. Economy
Role of a Business Economist
1. Identifying various business problems
2. Providing a quantitative base for decision making
and forward planning.
3. Act as a thinker.
4. Act as an economic advisor to the firm.
5. Respond to the dynamic changes taking place in
market situation.
How traditional
economics is different
from business
economics?
Economics Business Economics
1. It is more comprehensive and 1. It is too narrow and has limited
wider in scope scope
2. It is concerned with body of 2. It deals with the application of
principles economic principles to the
problems faced
3. It includes both micro and 3. It is micro in nature
macro economics
4. The scope of assumptions are
4. It is based on no of assumption limited as it is concerned with
application of theories
5. It is both positive and normative 5. It is mainly a normative science
science 6. It deals with the problems of a
6. It discusses general economic firm only
problems
7. Decision making and forward
7. Model building is the main planning is the main function of
function of the economist the business economist
Applications of B.E.
Polling question
Rational decision making requires that
(a) One’s choices to be arrived at logically and
without error
(b) One’s choices should be consistent with
one’s goal
(c) One’s choices never vary.
(d) One makes choice that do not involve
trade-off
Forms of Economic Analysis
Micro and Macro
Microeconomics Macroeconomics
(“micro” meaning (“macro” meaning
small): study of the large): study of
behaviour of small aggregates.
economic units. – Focus on aggregate
– An individual demand and
consumer aggregate supply,
national income,
– a seller/ a producer/ a
employment, inflation,
firm, or a product.
Partial and General Equilibrium
Partial equilibrium General equilibrium:
analysis: Related to explains economic
micro analysis phenomena in an
Example- single market economy as a whole
Example- product market,
factor market etc.
Static and Dynamic Analysis
• Static economic • Dynamic state refers to
analysis is also known as a state where there is a
a timeless economy change.
• Stationary state is an • The economic variables
economy in which the like consumption function,
tastes, resources and income and investment in
technology do not change a dynamic state.
through time.
Positive and Normative
Economics
Positive economics: Normative economics:
“what is” in economic “what ought to be” in
matters economic matters.
• Analyzes problems on • Incorporates value
the basis of facts. judgments about what the
economy should be like.
Short Run and Long Run
Short run: Time period • Long run: Time period long
not enough for enough for consumers and
consumers and producers producers to adjust to any
to adjust completely to new situation.
any new situation. • All inputs are variable
• Some inputs are fixed
and others are variable
1. Basic economic concepts
2. Production Possibility Curve
SCARCITY CHOICE
BASIC ECONOMIC
CONCEPTS
OPPORTUNITY COST
• SCARCITY
– One of the important concepts in economics is
scarcity.
– Scarcity is defined as wants always exceed limited
resources to satisfy them.
– Scarcity is a universal problem faced by poor as well
as rich nations in order to fulfil their needs.
• It give rise to the problem of resource allocation.
• In technical terms, scarcity implies excess demand.
Whenever, demand for a commodity exceeds the
supply of the same commodity, then, there is a
scarcity of that particular commodity.
• Scarcity is the is the root of the problem which
requires the managerial attention.
Real Life Examples
