CONTRIBUTION AND

APPLICATION OF BUSINESS
ECONOMICS TO BUSINESS

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 LEARNING OBJECTIVES
• Contribution And Application Of Business Economics To Business
• References

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 LEARNING OUTCOMES
S.NO LEARNING OUTCOMES PO

1 To make students understand the PO1, PO2

contribution and application of Business
Economics to Business

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 CONTRIBUTION AND APPLICATION OF
BUSINESS ECONOMICS TO BUSINESS
The overall role of managerial economics is to increase the efficiency of decision making in businesses to
increase profit:
• Pricing- Managerial economics assists businesses in determining pricing strategies and appropriate pricing
levels for their products and services. Some common analysis methods are price discrimination, value-based
pricing and cost-plus pricing.
• Elastic vs. Inelastic Goods- Economists can determine price sensitivity of products through a price elasticity
analysis. Some products, such as milk, are consider a necessity rather than a luxury and will purchase at most
price points. This type of product is considered inelastic. When a business knows they are selling an inelastic
good, they can make marketing and pricing decisions easier.

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 CONTRIBUTION AND APPLICATION OF
BUSINESS ECONOMICS TO BUSINESS
• Operations and Production
• Managerial economics uses quantitative methods to analyze production and operational efficiency through
schedule optimization, economies of scale and resource analyses. Additional analysis methods include
marginal cost, marginal revenue and operating leverage. Through tweaking the operations and production of a
company, profits rise as costs decline.
•
• Investments
• Many managerial economic tools and analysis models are used to help make investing decisions both for
corporations and savvy individual investors. These tools are use to make stock market investing decisions and
decisions on capital investments for a business. For example, managerial economic theory can be used to help
a company decide between purchasing, building or leasing operational equipment.
• Risk
• Uncertainty exits in every business and managerial economics can help reduce risk through uncertainty model
analysis and decision-theory analysis. Heavy use of statistical probability theory helps provide potential
scenarios for businesses to use when making decisions.

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 REFERENCE
• Essentials of Business Economics”- Dr. D.N. Dwivedi, revised edition-
2018, Vikas Publishing house.

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