This document provides an overview of business economics as taught in a Bachelor of Business Administration program. It defines business economics as the integration of economic theory with business practice to facilitate decision making. It discusses key concepts covered like opportunity cost, discounting principle, short and long run perspectives, incremental reasoning, and the equi-marginal concept. The document also outlines the characteristics, scope, nature and fundamental economic concepts of business economics.

1. BUSINESS ECONOMICS
BACHELOR OFBUSINESS ADMINISTRATION
FIRST SEMESTER
2020-21
Ms. Eda Suneetha B.Tech EEE MBA Finance (PhD)
Associate Professor
RGR Siddhanthi college of MBA
affiliated to Osmania University
Near JBS Secunderabad
mail: esuneethargr@gmail.com
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2. ECONOMICS:
It is defined as a social science which covers the actions of individuals and groups
of individuals in the process of producing, exchanging and consuming of goods
and services to achieve optimization of resource use.
•Production
•Exchange
• consumption
Economics is the science which studies human behaviour as a relationship between
ends and scarce means which have alternative uses.
Business Economics :
It is defined as integration of economic theory with business practice of the
purpose of facilitating decision making and forward planning by the Management.
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3. Applications:
1. Use of optimum techniques to improve organizational decisions
2. Understanding individual and market demand to forecast the demand
3. Analyze cost and supply structure to understand supply decisions.
4. Understanding markets.
5. Understanding external factors like inflation , unemployment
Characteristics:
1. Micro economic in nature
2. Use of economic theories
3. Normative science
4. Macro economic uses
5. It is science or art.
Scope:
1. Demand forecasting
2. Cost analysis
3. Profit analysis
4. Capital management
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Nature:
1. It is confined to only to a part of a business
2. It relies on the application of economic principles and
methodologies .
3. It is practical in subject.
4. It is goal oriented
5. It uses micro and macro economic concepts.

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Fundamental economical concepts :
• Opportunity cost:
it is the revenue foregone by pursuing one course of action rather than
other.
it is the cost incurred in choosing the next best alternative.
points to remember:
* calculation of opportunity cost involves the measurement of sacrifices.
* sacrifices may be monetary or real.
* It is termed as the cost of sacrificed alternatives.
• Discounting principle
if a decision effects the cost and revenue at future dates, it is required to
discount those costs and revenue to the present values before a valid
comparison of alternatives if possible.
A Rupee now is more worthful than a rupee in the future.
The process of reducing future values to their present values is called as
Discounting.
• Time perspective:
Short run and long run
To maintain the right balance between perspectives.

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• Incremental reasoning
 it involves in identifying the impact of decision alternatives.
 they are incremental revenue and incremental cost.
 it involves estimating then impact of decision alternatives on costs and
resources, emphasizing the changes in the total costs and total revenues
resulting from the changes in prices, products, procedures and
investments.
• Equi-marginal concept.
it plays a role in helping the managers in resource allocation strategies. It
deals with the allocation of available resources among the alternative
activities.
VMP1= VMP2= VMP3
VMP is the net of incremental cost.
The measurement of VMP may have to be connected if the expansion of an
activity requires a reduction in the prices of the output.