Applied Economics: Theories of Corporate Activity

Business has become an indispensable part of people’s lives. It helps people get things done by improving their efficiency and reducing cost. The scope of business is so vast that it has become one of the leading career choices of young people. It is also an essential element of a market economy, with the existence of markets for all kinds of products, services, and commodities. In such a market economy, the role of business in shaping social structure and economy of a nation is very important.

Market economy is a discipline in economic studies that make use of quantitative methods and economic theory to study the various aspects of firm operations and the interrelations of firms with labor, capital and other factors. Theory of demand suggests that the supply of some good should correspond to the need for it, while the other demand should be related to the size of the market. In market economy, demand determines price, while the level of supply determines the relative prices of goods and services. A firm’s production is partially determined by demand, while the extent of external inputs is partially determined by the firm’s needs. Economic textbooks usually describe market economy in two terms: producer-producers and market economy.

Practical Economics is the study of the economic problem and solutions. It is concerned with economic problems confronting organizations and individuals, including the supply, demand, price and production of the major means of distributing goods and services. It uses the concept of production efficiency as the basis of economic analysis. Applied economics aims to meet economic objectives through a comprehensive system of policies. Economic concepts used in applied economics include concepts from economics, business, accounting, statistics, psychology, economics and computer science.

Business and economic theory are closely related and share many similarities, though there are significant differences as well. In fact, business analysis is the analysis of company-to-company competition, business development and growth, and the effect of mergers and acquisitions on competitiveness. Applied economics focuses on the analysis of the economy as a whole. The scope of business and economic theory is much broader than that of business and economics.

Applied business economics refers to a branch of economics that has a broad scope and utilizes many of the same statistical techniques as business economics. Applied managerial economics applies concepts and methods of business to the businesses and organizations within an organizational structure. Applied economics also utilizes concepts of macroeconomics, microeconomics to examine the relationships between the production, distribution and consumption of resources. It makes use of several different styles of data collection and analysis. All these techniques are essential to form economic concepts on their own, and help in the better understanding of the economic system as a whole.

All economic analysis are grouped into three main categories; government intervention, private enterprise and free markets. Government intervention occurs when a government body such as the Federal Trade Commission, the Federal Reserve Board, or the National Bureau of Economic Research, controls, regulates or tries to influence businesses in a certain industry. Examples of government interventions include tariffs, subsidies, guarantees, licenses, and other forms of direct and indirect support. Examples of private enterprise include foreign direct investment, venture capital, internal trade concerns, and local business marketing strategies.

On the other hand, free-market capitalism refers to a system where the decisions of business owners and managers are made free from governmental intervention. Business owners and managers to determine the prices of their products, services, and business operations by relying only on pure market forces. For applied economics, the topics of business economics include environmental issues, corporate social responsibility, environmental pollution, industrial policy, and technological change.

A centrally planned economy would have people working for wages who receive salaries in terms of the market value for all their inputs, goods, and services. This type of economy would not allow entrepreneurs to compete for market share, innovate for product improvements, or expand in either size or speed. It would not allow people to develop skills, become experienced, or hire other capable people at reasonable cost. It would also severely limit growth and prosperity. Centralized economies with this structure tend to fail because they lack flexibility and they become over-dependent on imported goods, which are not competitive in terms of quality, quantity, and price.

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