Business has been called the “economy” and so it is primarily the study of how business relates to the economy. The term “the economy” is also used in the United States government’s statistical analysis of the performance of businesses throughout the nation. Business economics is an area in applied economics that makes use of economic theory and numerical methods to examine the factors contributing to the variation of organizational structures and their relationships with product, capital and labor markets. Understanding the nature and function of business economies is crucial to management, economic development and economic competitiveness.
Economics is the application of economic principles to promote the efficient production, management and distribution of goods and services. Economics considers the distribution of resources between levels of demand and supply as well as between various forms of entry into the market. Some of the most basic economic principles, such as the demand-supply principle, are often used in business economics to evaluate how the structure of an economy affects the operation of business practices. Other important concepts, such as business cycles, asset allocation, price determination, and optimal production levels, are fundamental elements of business economics.
Analysis of business decisions and the process of making those decisions is also called decision science. A variety of approaches are used by business managers to improve the way they make decision-making decisions. One major area of research within the discipline is that of technical analysis. Economic theory and statistical methods are applied to develop and test theories of decision-making. Other important areas of business economics research include marketing, financial markets and business cycles.
Economics considers the interdependence of economic concepts and theoretical predictions from economic textbooks, journals and practitioners. The study of business decision making is intimately connected to understanding economic concepts and theory. Theory is the study of how individuals, firms and institutions decide to make a particular business decision. Market theory deals with the processes by which prices are determined. Entrepreneurship theory deals with the characteristics of start-ups, and also with the nature of new companies in a particular market.
Microeconomic theory deals with the decision-making process and associated output indicators of micro businesses. Production theory applies to firms with limited resources and focuses on the decisions made by business managers. Managerial economics applies to firms with large number of employees, but is more closely related to macro economic concepts and theories. Economics of market structure focuses on the relationships between supply and demand.
A number of popular current economic theory topics are discussed in business economics books. These include general equilibrium, business cycles, economic globalization, asymmetric competition, and perfect competition. The balance of payments problem is one of the most widely discussed topics, especially with respect to international trade. The theory of rent control and capital budgeting also receive a great deal of attention from business managers.
Economic theory provides an important forum for debate among business economists. Controversies such as over-regulation, over licensing, overpricing, and overproduction often receive public attention, as do concerns over issues concerning price controls, overerous labor regulations, and overerous environmental regulations. Business economists also debate the efficiency of various business practices such as over-staffing, over investment, and over consumption of available resources. They also debate the effects of government policy. Many current business managers consider themselves to be agents of economic theory.
In terms of management styles, business economics helps managers make better informed decisions. It helps managers identify the risk/reward balance that they need to maintain when making strategic decisions. It enables managers to identify areas of opportunities and challenge the assumptions and biases they have regarding all the main business factors. This helps them make the right decisions and prevents them from making the wrong ones. The book concludes by showing that the different economic factors have a direct and undeniable impact on organisation performance.