Introduction, scope and tools of Business Economics. Business Economics and Managerial Functional Decisions.

1. Business Economics
Dr Raju Indukoori

2. Business Economics
• It is the combination of micro economics in specific to
the firm and macro economics in general with industry,
market and the economy to meet organizational goals or
objectives.
• It is the applied economic theories combined with
quantitative tools to examine business complexities to
achieve management objectives most efficiently.
• It is the study of how we use our resources for
production, distribution and consumption of goods and
services.
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3. Business Economics Equivalent
1. Industrial economics: Associated with
manufacturing business.
2. Economics for business: All types of
business.
3. Managerial economics: In-depth and
narrow focus on managerial application
of economics.
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4. Scope of Business Economics
The scope of business economics lies in all business and
managerial problems and conflicts related to variety of
business processes including
• Manufacturing
• Services
• Trading
• Mining, forestry,
• Agriculture, farming, culturing,
• Export business
• Investments
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5. Scope of Business Economics Tools
1. Classical Economics: Value, international trade and political
economy.
2. Neo Classical Economics: Determination of goods, output, and
income distributions in the market through demand and supply.
3. New Institutional Economics: Social and legal dimensions.
4. Statistics: Data collection, organization, display, analysis,
interpretation and presentation to trace economic relationship.
5. Econometrics: Application of statistical methods to economic data.
6. Operations Research: Application of modern or advanced analytical
tools which are the outcomes of research.
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6. Business Economics Programs
Several colleges and universities across the world including India offer Business
Economics Degree courses in their Bachelor’s and Master’s programs.
Bachelor Programs
• Bachelor of Business Economics (BBE)
• Bachelor of Science in Business Economics (BSc BE)
• Bachelor of Business Administration in Business Economics (BBA BE)
• Bachelor of Art in Business Economics (BA BE)
Master Programs
• Master of Business Economics (MBE)
• Master in International Business Economics (MIBE)
• Master in Applied Business Economics (MABE)
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7. Business Economics and Managerial Functions
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8. 1. Finance Decisions
• Capital budgeting
• Financial performance and Financial position
• Financial Risk Management
• Liquidity
• Profit maximization
• Profitability
• Raising Capital
• Sinking Fund
• Value: Firm, equity, bond, dividends and cash flows.
• Wealth Maximization
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9. 1. Financial economics
• Capital formation.
• Consumption function.
• Demand for and supply of money.
• Economic Indicators.
• Financial economies.
• Functions of money.
• Inflation.
• Investment function.
• Investment Savings & Liquidity Preference Money Supply(IS-LM)
• Time value of money: Discounting and Compounding.
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10. 2. Marketing Decisions
 Market Barriers: Entry and Exit barriers
 Market Penetration
 Market Positioning
 Brand Identity
 Brand recognition
 Target customers
 Quality
 Market Saturation
 Premiumization
 Rarity
 Status
 Design
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11. 2. Marketing Economics
 Business Advantage
 Absolute Advantage
 Competitive Advantage
 Demand forecasting.
 Economies of scope: Variety of choice
 Market Saturation
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12. 3. Human Resources Decisions
 Core competency
 Cost cutting and layoff
 Human capital investment
 Make or buy
 Optimum utilization of resources
 Outsourcing: BPO, KPO
 Pay roll
 Wages
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13. 3. Human Resources Economics
 Employment theories
 Income elasticity
 Labor economies
 Labor market economics.
 Wage Theories
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14. 4. Production and Operational Decisions
 Automation
 Capacity expansion
 Domestic purchase or Foreign imports
 Make or buy
 Operational efficiency
 Production optimization
 Productivity and Output maximization
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15. 4. Production and Operational Economics
 Cost function: Fixed cost, variable cost, marginal cost, and Opportunity cost
 Economies
 Economies of scale (Internal Economies)
 Economies of By-products
 Economies of localization
 Laws of Production
 Law of Variable Proportion or Law of diminishing returns
 Law of Returns to scale
 Product: Marginal, average and total product
 Production function: Factors of Production, Cobb-Douglas Production function.
Least cost combinations, Iso-quant and Iso-cost curves,
 Production, Supply and Profit Analysis.
 CVP Analysis.
 Break-Even Analysis.
 Supply function: Law of supply, supply determinants, elasticity of supply
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16. 5. Logistics and Supply Chain Decisions
 ABC Model of Inventory.
 Forward and backward mergers
 Inventory vs Inflation
 Modes of transport
 Nearness to market
 Warehousing Vs Just in Time (JIT)
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17. 5. Logistics and Supply Chain Economics
 Cost function
 Economies of scale
 Nearness to market
 Opportunity cost
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18. 6. Economy and Market Decisions
 Capital raising
 Government Policy
 Globalization
 Interest rate volatility.
 Price Volatility.
 Recession.
 Taxes.
 Technology
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19. 6. Economy and Market Economics
 International trade
 Political economy
 Business cycles
 Public economics
 Aggregate demand and supply
 Money supply
 Fiscal policy
 Monetary policy
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20. Raju Indukoori
Business / Managerial Problem/s
Economics
Microeconomics
Macroeconomics
Quantitative Tools
Mathematical Economics
Econometrics
Application of
Economics and Quantitative tools
deriving alternative solutions
for managerial problems.
Managerial Decision.
Business Economics Hierarchy
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21. Business Economics Info
Indian Business and Economics
 Business Economics: www.businesseconomics.in
 Business Line: www.thehindubusinessline.com
 Economy of India: www.indiastat.com
 Economic Times: www.economictimes.com
 Indian Brand Equity Foundation: www.ibef.org
 Indian Government Data: www.data.gov.in
 Reserve Bank of India (RBI) : www.dbie.rbi.org.in
Global Business and Economics
 Bloomberg: www.bloomberg.com
 Financial Times : www.ft.com
 International Monetary Fund (IMF) : www.imf.org
 Organization for economic cooperation and Development (OECD) : www.oecd.org
 The Economist: www.economist.com
 Trading Economics: www.tradingeconomics.com
 World Bank: www.worldbank.org
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22. Thank You
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23. Questions?
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