Question

Write a short notes on : Scope of Business Economics?
(October​

Answer 1

1. Analyzing Demand and Forecasting

Analyzing demand is all about understanding buyer behavior. It studies the preferences of consumers along with the effects of changes in the determinants of demand. Also, these determinants include the price of the good, consumer’s income, tastes/ preferences, etc.

Forecasting demand is a technique used to predict the future demand for a good and/or service. Further, this prediction is based on the past behavior of factors which affect the demand. This is important for firms as accurate predictions help them produce the required quantities of goods at the right time.

Further, it gives them enough time to arrange various factors of production in advance like raw materials, labor, equipment, etc. Business Economics offers scientific tools which assist in forecasting demand.

2. Production and Cost Analysis

A business economist has the following responsibilities with regards to the production:

Decide on the optimum size of output based on the objectives of the firm.

Also, ensure that the firm does not incur any undue costs

3. Inventory Management

Firms can use certain rules to reduce costs associated with maintaining inventory in the form of raw materials, work in progress, and finished goods. Further, it is important to understand that the inventory policies affect the profitability of a firm. Hence, economists use methods like the ABC analysis and mathematical models to help the firm in maintaining an optimum stock of inventories.

4. Market Structure and Pricing Policies

Any firm needs to know about the nature and extent of competition in the market. A thorough analysis of the market structure provides this information. Further, with the help of this, firms command a certain ability to determine prices in the market. Also, this information helps firms create strategies for market management under the given competitive conditions.

5. Resource Allocation

Business Economics uses advanced tools like linear programming to create the best course of action for an optimal utilization of available resources.

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Answer 2

Business Economics is primarily a branch of Economics which deals with the application of economic theories and principles in decision making process of any business organization or company with regards to all aspects of business operation.

Explanation:

Scope of Business Economics:-

• A thorough evaluation and future projection of consumer demand in the market,which is essential to plan future production level of output and predict or estimate potential revenue and sales.
• Cost and inventory analysis,indicating that firms or companies have to evaluate the estimate cost/expenses of production and esnure sufficient level of inventory according to consumer demand or sales order.
• Accurate estimation of price of a commodity which is important for the firm to analyze potential revenue or profit.
• Long term decision making of the firms with regards to capital budgeting and capital management.If the firm wants to undertake any long term project,it has to accurately estimate the level of capital or financial investment that would be required.
• Market Research about the market competition or effectively estimating the level of competition or rivalry in the market which would determine the potential profitability of any firm or company.