We will know about the Scope of Business Economics.
According to Joel Dean:
“The purpose of managerial economics is to show how economic analysis can be used in the formulation of business policies. The word business economics and managerial economics are synonyms. Therefore these words are often used interchangeably”
Scope of Business Economics
Following is the Scope of Business Economics:
a. Demand Analysis and Forecasting:-
Demand analysis is very useful to know the factors determining a demand for a product. It provides guidelines to create demand. Similarly, a major part of business decision-making depends upon accurate estimates of demand. Hence, It means that forecast of future sales is essential before making production decisions.
b. Cost and production analysis:-
In this context, business economics deals with determining the optimum level of output and the minimum level of average cost of production. Hence, To earn a certain level of profit, a certain level of goods has to be produced, and to obtain such products, some costs have to incur.
c. Pricing decisions and method:
The success of a business firm depends upon its pricing decision. If the pricing decision is appropriate, production of the firm can get market and the firm can earn profit. But if it is inappropriate, products of the firm will not get market and thus firm will have to bear the loss.
d. Profit Maximization:
The main objective of the business firms is to earn maximum profit. But profit is always uncertain because of fluctuation in price, changes in the price of factors of production, changes in the Nature of competition, changes in technology, etc. Therefore, profit planning and profit management are necessary for improving profit earning, and the efficiency of the firm.
e. Business environment:
Business economics studies the business environment. Hence, the phases of the business cycle situation of money and capital market, market structure, the purchasing power of people, etc are studied under the business environment.
f. Objectives of the firm:
Every firm has an objective. The objective of the firm may be many ranging from profit maximization to sales maximization. However, a firm may have one objective at a time. Hence, the theories regarding the objective of the firm are studied in business economics.
g. Capital and investment management:
The theory of capital and investment explains important issues like the selection of suitable investment projects, efficient allocation of capital, assessing the efficiency of capital, etc.
Hence, these are the scope of Business Economics.
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