Business economics introductionPresentation Transcript
Business Economics – Introduction Sameer Gunjal
What is Economics?
Economics is the branch of social science that studies the production, distribution, and consumption of goods and services.
An important concept that underlies all economic theories and studies is that of scarcity.
The scarcity of goods and services is due to factors such as the limitations of:
Resources (water, land, manpower)
Capabilities of technology or skill
Poor planning and execution – artificial scarcity
Sub Divisions of Economics
Microeconomics : Deals with concepts of supply and demand, production and costs, types of competition, etc. more to do with the micro perspective. In other language the analysis is bottom up in nature.
Macroeconomics : Deals with concepts like economic growth, monetary and fiscal policies, central banks, concepts of money supply, etc. more to do with the macro perspective. In other words the analysis is more of top down nature.
Basis of Classification
Rationality implies acting objectively, keeping in view:
Ends and means
Objectives and constraints
The objectives of a firm : Maximize revenues and thus profits
Decision making for the same happens under various constraints
Steps in Decision Making
All possible courses of action are known to you
You are able to separate all such courses of action into two categories feasible and infeasible
Based on the available information assess the consequences of any course of action
Rank the alternatives in terms of priority
Choose that course of action which occupies the highest order of priority
Economic System - Circular Flow
Economic Balance - Government
Basic Concepts – Microeconomics
Concept of Economic Profit, Opportunity Cost and Accounting Profit
Functional Relationship – Total, Average and Marginal