Business Economics

Business economics is popularly termed as managerial economics. This special branch of economics comes under the domain of microeconomics. Business economics is designed to critically analyze specific business related decisions from the microeconomic point of view.

Uses of Business Economics
Business economics proves to be of great use in the practical application of microeconomic theory. It helps in the realistic application of microeconomic approaches in analyzing critical managerial decisions. Business economics makes use of sophisticated quantitative tools in explaining the business decisions.

The use of Lagrangian Calculus in Linear form and correlation and regression analysis makes it more acceptable to the common people.Business economics is mostly based on a unifying theme.
While dealing with a particular business decision managerial economics takes into account the ultimate objective of the firm. The given constraints are also taken care of.
Lagrangian method is used to derive the optimal business solution for the firm given the objective and constraints. Among the other quantitative techniques used in business economics, programming and operations research are worth mentioning.

Business economics is capable of analyzing almost all types of managerial decisions. However, the common application areas of business economics include the following:

Analysis of Production: Business economics is widely used in analyzing economies of scale in production, efficiency of production, optimum allocation of factors of production, production cost, cost function and many other production related issues.

Analysis of Capital Budgeting: Business economics uses the theory of investment in explaining firm�s decision regarding capital purchase.

Analysis of Risk: The techniques of risk quantification, different types of decision rules and many other uncertainty models are being used to determine the risk associated with a particular business decision.

Analysis of Pricing: Business economics is useful in analyzing pricing decisions as well. Joint product pricing, estimation of price elasticity, transfer pricing, selection of optimum pricing technique and price discrimination are some of the common areas of pricing analysis where the methods of business economics are used.

A number of renowned universities offer Business Economics as advanced undergraduate program. Some UK universities come with integrated degree courses in Business Economics. Industrial economics, financial economics and managerial economics are the major specialization areas covered by Business Economics.

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Last Updated on : 29th July 2013

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