Business Economics is the application of economic theory and methodology to business. Business involves decision-making. Firstly, Decision making means the process of selecting one out of two or more alternative courses of action. However the decision-making function becomes one of making choice and taking decisions that will provide the most efficient means of attaining a desired end, say, profit maximization.
Definition
According to Mc Nair and Meriam, “It consists of the use of economic modes of thought to analyse business situations.”
According to Mansfield, “It is concerned with the application of economic concepts and economic analysis to the problem of formulating rational decision making”.
Nature
- Microeconomics – It is microeconomic in character. In addition, it studies the problems of an individual business unit. Meanwhile it does not study the problems of the entire economy.
- Normative science – Managerial economics is a normative science. Moreover, under particular circumstances it is concerned with what management should do. Similarly it determines the goals of the enterprise. It develops the ways to achieve these goals.
- Pragmatic – It is pragmatic. Therefore, it concentrates on making economic theory more application-oriented. It tries to solve the managerial problems in their day-to-day functioning.
- Prescriptive – Managerial economics is prescriptive in nature. similarly, it prescribes solutions to various business problems.
- Uses macroeconomics – Macroeconomics is useful to business economics. However, macro-economics provides an intelligent understanding of the environment in which the business operates.
- Management oriented – The main aim of managerial economics is to help the management in taking correct decisions and in addition preparing plans and policies for the future.
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