Ans1: - Economics is a social science concerned with the production, distribution, and consumption of

goods and services. It studies how individuals, businesses, governments, and nations make choices about
how to allocate resources. Economics focuses on the actions of human beings, based on assumptions that
humans act with rational behavior, seeking the most optimal level of benefit or utility.
According to J.M. Keynes, Economics is defined as “the study of the administration of scarce resources and
of the determinants of income and employment.”
In Benham’s words, economics is “a study of the factors affecting the size, distribution, and stability of a
country’s national income.”
Economics can generally be broken down into Macroeconomics, which concentrates on the behavior of the
economics as a whole, and Microeconomics, which focuses on individual People and businesses.
Business economics is a field in applied economics which uses economic theory and quantitative methods
to analyze business enterprises and the factors contributing to the diversity of organizational structures and
the relationships of firms with labour, capital and product markets. Economics refers to the study of the
components and functions of a particular marketplace or economy—such as supply and demand—and the
impact of the concept of scarcity. Within economics, production factors, distribution methods, and
consumption are important subjects of study. Business economics focuses on the elements and factors
within business operations and how they relate to the economy as a whole.
Organizations face many problems on a day-to-day basis. These problems require careful analysis and
thoughtful consideration. For example, organizations are always concerned with producing maximum output
in the most economical way. To solve problems of such nature, managers are required to apply various
economic concepts and theories. The application of economic concepts, theories, and tools in. Business
decision making is called business economics or managerial economics.
In Organisations, Managers deal with various situation that require quick decision making. Decision taken by
the manager are subject to various risks and uncertainties due to change in market forces, business
environment, business policies etc. their decision can take the organization towards failure. Therefore, they
use various Economic models, tools, and technique to analyze the various factors before taking any
decision. These economic models provide a base of effective business decision making to managers.
Organisation can analysis and forecast of Demand. Under this the economist of organization understand the
demand curve of market. It is about understanding the consumer behavior, their preferences and other
factors. By forecasting the forecasting, the demand means predicting the demand of certain goods in
advance. Which helps company to manufacture its product accordingly.
Analysis of Production and Cost When it comes to production, a business analyst has a couple of important
responsibilities. Decide the optimum quantity of the products keeping the firm's objectives in mind.Ensure
that the firm does not face any losses. With product analysis, a firm can decide on the appropriate technology
required to meet the output demands efficiently. On the other hand, a study of cost analysis lets the firm know
who changing periods of production, size of the factory, etc., will affect their expenditures. By combining these
ideas, a firm can achieve the optimum balance between the maximum output for minimum investment. Here
too, we find the extent or scope of Business Economics.
Understanding Markets and Pricing
Market analysis is an essential part of Business Economics which lets the firm understand the degree of
competitiveness in a market. This information helps them chart proper policies and determine the right prices.
Price theory helps the firm understand the process of cost determination keeping the market situation in mind.
This theory is an area where the scope and importance of Business Economics are highly noticeable.
As Mr. Shyam explain above that Business economics helps business to establishing relationships between
different economic factors, such as income, profits, losses, and market structure. This helps in guiding
managers in effective decision making and running the organisation.

Ans2: - Law of Variable: - Law of Diminishing returns is an important concept of the economic theory. The
law of diminishing returns is a short run concept where some factors are fixed and some are variable. This
law examines the production function with one variable keeping the other factors constant. It explains that
when more and more units of a variable input are employed at a given quantity of fixed inputs, the total
output may initially increase at an increasing rate and then at a constant rate, and then it will eventually
increase at diminishing rates. It implies that the total output initially increases with an increase in variable
input at a given quantity of fixed inputs, but it starts decreasing after a point of time.
Let us understand the law of diminishing returns with the help of an example (Which was given in question)

Quantity Total Product Average Product Marginal Product Stage of production

 1 10 10 10

2 30 15 20

3 48 16 18 Increasing Returns

4 56 14 8

5 56 11.2 0 Diminishing Returns

6 52 8.7 -4 Negative Returns

Increasing Returns: - This refers to the stage of production in which the total output increases initially with
the increase in the number of Product. the increase in the marginal product till the number of Quantity
increased to 3.
Diminishing Returns: This refers to the stage of production in which the total output increases, but marginal
product starts declining with the increase in the number of Quantity. The declining of marginal product as
the number of workers reaches 5.
Negative Returns: It refers to the stage of production in which the total product starts declining with an
increase in the number of Quantity. the total output reaches to maximum level at the 6th Quantity. After that,
the total output starts declining. Marginal product becomes negative at this stage.

Ans3a: - Economies of scale are cost advantages reaped by companies when production becomes efficient.
Companies can achieve economies of scale by increasing production and lowering costs. This happens
because costs are spread over a larger number of goods. Costs can be both fixed and variable. Economies
of scale refer to the cost advantage experienced by a firm when it increases its level of output. The
advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced. The
greater the quantity of output produced, the lower the cost Fixed and Variable Costs Cost is something that
can be classified in several ways depending on its nature. One of the most popular methods is classification
according. There are several reasons why economies of scale give rise to lower per-unit costs. First,
specialization of labor and more integrated technology boost production volumes. Second, lower per-unit
costs can come from bulk orders from suppliers, larger advertising buys, or lower costs of capital.

There are two type of Economic Scale.

Internal Economies of Scale: - These refer to the economies that a firm achieves due to the growth of the
firm itself. When an organization reduces costs and increases the production, internal economies of scale
are achieved. Internal economies of scale refer to the lower per unit cost that a firm obtains by increasing its
capacity. There are Five types of Internal Economies of Scale. 1. Bulk-buying economies 2. Technical
economies 3. Financial economies 4. Marketing economies 5. Managerial economies

External economies of scale: - External economies of scale are business-enhancing factors that occur
outside a company but within the same industry. In addition to lower production and operating costs,
external economies of scale may also reduce a company's variable costs per unit because of operational
efficiencies. When an industry’s scope of operations expands, external economies of scale are said to have
been achieved. For example, the creation of a better transportation network, which results in a subsequent
fall in the transportation cost of a firm operating within that industry, leads to external economies of scale.
Some of the main factors that lead to external economies of scale are as follows:
Improvement in transport and communication network.
Focus on training and education within the industry.
Support of other industries.

Ans3b: - First we need to understand what is Shift and Movement in Demand curve.

There are other factors to the shift other than Price.

Shift in Demand Curve: A shift in the demand curves displays changes in demand at each possible price,
owing to change in one or more non-price determinants such as the price of related goods, income, taste &
preferences and expectations of the consumer. Whenever there is a shift in the demand curve, there is a
shift in the equilibrium point also. The demand curve shifts in any of the two sides: Rightward Shift: It
represents an increase in demand, due to the favorable change in non-price variables, at the same price.
Leftward Shift: This is an indicator of a decrease in demand when the price remains constant but owing to
unfavorable changes in determinants other than price.
So, whenever the Price Increase the Quantity demanded is decreased.

Movement in Demand Curve: - Movement along the demand curve depicts the change in both the factors i.e.
the price and quantity demanded, from one point to another. Other things remain unchanged when there is a
change in the quantity demanded due to the change in the price of the product or service, results in the
movement of the demand curve. The movement along the curve can be in any of the two directions: Upward
Movement: Indicates contraction of demand, in essence, a fall in demand is observed due to price rise.
Downward Movement: It shows expansion in demand, i.e. demand for the product or service goes up
because of the fall in prices.

Difference Between Movement and Shift in Demand Curve.

Shift in Demand Curve

1. When, the price of the commodity remains constant but there is a change in quantity demanded due
to some other factors, causing the curve to shift in a particular side, it is known as shift in demand
curve.
2. The shift in demand curve changes its position due to the change in the original demand relationship.
3. A shift in demand curve occurs due to the changes in the determinants other than price i.e. things
that determine buyer’s demand for a good rather than good’s price such as Income, Taste,
Expectation, Population, Price of related goods, etc.
4. A shift in the demand curve represents a change in the demand for the commodity.
5. Shift in the demand curve, can either be rightward or leftward. A rightward shift in the demand curve
shows an increase in the demand, whereas a leftward shift indicates a decrease in demand.

Movement in Demand Curve

1. When the commodity experience change in both the quantity demanded and price, causing the curve
to move in a specific direction, it is known as movement in demand curve.
2. Movement in demand curve, occurs along the curve
3. Movement along a demand curve takes place when the changes in quantity demanded are associated
with the changes in the price of the commodity.
4. Movement along demand curve is an indicator of overall change in the quantity demanded.
5. Movement of the demand curve can either be upward or downward, wherein the upward movement
shows a contraction in demand, while downward movement shows expansion in demand.