role of business economics is important in business decisions discuss
Answers
As we all aware that business economics is the application of economic theory and methodology to business. Business economics is a field where it uses economic theory & quantitative methods to analyze business enterprises. Business involves decision making. Decision making means the process of selecting one out of two or more alternative courses of action. Business Economics is concern with economic issues & problems related to business organization, business management, and business strategy.
“What is happening” rather than “What will happen” is the key of Business Economics.
Business Economics means:-
1. “The addition of economic theory with business practice for the purpose of facilitating decision-making and future planning with the help of management.”
2. “Business Economics is the science, arts, and commerce which directs how scare resources to manage cost (price) effectively and to maximize profit of the business”.
The Scope of business economics is so wide that it holds almost all the problems & areas of the manager & company. It deals with demand analysis & forecasting, resource allocation, production function, cost analysis, inventory management, advertisement, price system, capital budgeting, etc.
Scope of business economics is discussed as under:
Demand analysis & forecasting: Demand forecasting is the process of finding the values for demand in future time period. A company is an economic organization which transform productive resources into goods to be sold in the market. Demands analysis helps to identify the various factors influencing the product demand and thus provides guidelines for manipulating the demand.
Demand analysis and forecasting provide the essential basis for business planning and occupies a strategic place in business economics.
Cost analysis: A study of economic costs, combined with the data drawn from the companies accounting records, can yield significant cost estimates which are useful for management decisions. An element of cost uncertainty exists because all the factors determining costs are not known and controllable.
Inventory management:-It refers to stock of raw materials which a company keeps. If the level of inventory is low, production will be hampered at the same time if the level of inventory is high then it will amounts to blockage of funds.
Advertisement:-Business economics helps in determining the total advertisement cost & budget, the measuring of economic effects of advertisement & form a fundamental part of decision making.
Price system:-Pricing is an important area of business economic. In fact, price is the origin of a company’s revenue and as such its success largely depends on how correctly the pricing decisions are taken.
Lets discussed how Business Economist plays an Important Role to take Business decisions:-