SEMESTEK- I
BUSINESS ECONOMICS
MODULE I: INTRobucT|ON
Ceonomte5 - Delion Scope of Econoveics - Methods- Dedoctve
and Induchive Method -Merits, bemeits - Business Ecoromtcs
Concept -Caraclesislies - Stope Siant Rcarce - Uses /oec Hves o
Man ageial Economics - Role of Managerial Economist - hole
and esponstbil
me tes
MODULE I: Theory of Demand and Supply
Demand - loncept , Determinants, Funciton, ty pes, Law oF Demand
Reasons for Douonward
Demand Schedule - Demand cuve -
Slope demand Curve~ Excentio ns to Law of Demand - Changes in
Ope o
Demand - Pice Elas hcits of Demand - loncept dgrees, tacto rs
alfecing price elas Hciy irmpori an e- lncomre elaskcihy - Cros
elastcity-Cross
ElasHcity (simple pro blems on elas kci ty of Demand)
Supply- Concept , Law of Supply , Dete minants of Supply
Elas hcty of Supply
MO DULE TL: UTILITY ANALYSIS
Cardtn al UHtk Analysis -Law of Diminishing Marginal UHlhy - Lauo of
Capal Margi nal UHIty-lndifference Curve nalys?s - Consumers
eqal?brium though Ic - ice effect- Imtome e!fect - subsAtuton
eect - Consumer Sur plus - Mars hal>s and Hicks Analysis
MobuLE M: PRoDUcloN AND CoST
Pro ducton - FactoYs of Po ducon - Producion Funcon - Lao of
Variable Poroportiors - Law 6f Returns to Scale -
Eono mks of 5cale Isoqyuents
Cost Concepts rOppuruni ty, Fixed , Valvable, Total , Averaqe , H?stoícal,
Futue Cos4 - Cost Funcion - Cost and Ovtput
helationship - Short un
Break Even Analysis (Simple Prodems) - Cosl Conhol
’MoDULE V: PRICING UNDER DIFFERENT MARKETS
Frm- oncept- ypes of Marke structore, erfect
Monopols - olgopoly- Ksed- Demand Compelfton -
Pice a and Obtpot Delermi na on in Cuve- Monopo l'stic Compekg
’ REFERENCES shortunand lonau
ÖBusines Economics bu
(to Busine ss Economis by' PNMton a Mury
Chopra
(t) Business Economis by Ahja
a9otanui
breumeoyo exterstsC? , fqpsne) bve
22er)-tioiteals soyobeebvog"
9eels
INTRODUCTION TO ECONOMICS
Adam Smith is callkd the Falher of ohe cavse
EConoks, he
Ahe'errst vé definiliono economtes 30166rude
deCihe d
Actovding to Adam Smith economics s
tBrnie,Iseorehnotaov
inquiny into and cau ses of
>1he tollouwngi are.theo various wfeahuresio Wealth bRoihfon
ven by Adarm Smith
* conomics is a studs of produchion ,onsump Horn
of material, gpods.orug
* Wealth includes only maeiel aoods! it doeso inot, take 9non
material qooda (3ervicess into
into Consideratoniis 52 wealth with
man to earn maximum
increase wealth, prodvchion of mateia_86d$ must
be incTeased
Thematn drw backs3faiago
of Wealth h DaRnitotln
t only considers malerial, qpods, and the Contepb.r of vdeiices
heobservatton of i'Ad am Siin is.Hhat homtabengs
lRke to qet maximum wealh
srininoum leffort
hromat ealituoirev
ofi wealth and
gnores avtal 3specta Called wellare.gelgvob
Wellare Defaition given by Prof Alfred..Marshel
Acording to Manshall-32 6 yo
lts the study mankind" 4he y y business o
tol'Morshaary
a a
Rfe. Theyelore, actovdng h
Ihevelore, actovdtra Man is
ceslHhis Secondary 9 e
’The ollowt ng Te 4he lPmitatons bWelaventDel?nHont
*Cqarettes ,aleoho elc. ave vn atental goo ds.hese Pr
though economte n nature donot pomote human wellare
This detilon est ricts the scope o e covn
welfare .1t does not omics in
abundance d wants. Constder5careity esoyrcee
’Scarctty De•tnlfon was gtven by
hnee basic nece ssi hes
namely
he abilky o a person to
8et
Roobins:
ood , clo hing
*Desire is deltned a5 wish o a person to and Shelte,
Pro duct.
* Wants are
desimes bached by purchasivg power
Attordina
6a Sience
ttoo Proj Lionel Robbins e
tonomics is -
which shudies human behaviour a5 a
between ends (wants) nd Scarce means which haw
aternaive u5e6
’ According to
Man ha6 Robbins economi cs Consists of the
*
hesources
Unltmited
4o
Satsfuhe
wantsleglhh
wants are
Collowing-
Warts have to be lmited in naBure
arranged in the
according
’ The Soll
topuTchasi ng power.
EA
* Economicsow'ing are the varioUS:
is only Conserned drawbacks od Scarcty defoi
* t does with, wants and
noto pay atenion to esoTces..
developrnent ,
k Consi ders unemploynent ebc.
oncepts I1 ke economic qtouh,
’ Modern economts orly
26w
sience
e According t6Gyowth .Oriented
ed,definiton,t
Pro heynes and
b he
posstble problem s Present Prod
in Samuelson economics
gíves 9pp i
Solukons to sove the problems and reConomy and elonom
qrouwth and development o a promoBes the overal! etoen
County
Nauré. and Scope of, Economics: Lsies
Ts Concepl de als
This tith the fot lowing aspects weeN
1To g8certaintnetner economics,wis; an, arto 07 as Science
1: Todetermne whetheretonomicsy isvia posi hveosciengel, or a
normmave science. stkesttdglsitL to. oolos vie
Econgrniss.ts a8cience because wtt.ds c sgshemshzed Colleckon
of economic fa cls ande Savtes Econórntca laus re siml3r to
stienHiic lYws be cause Hheu estabtsh Cause Eflect mel tonship
between variables. Economics 5 called a Socta Sienceswhich
gives pproximate anserS unlke pure siences Ike Math
slats lhes,phystcsietc. canno be conßtned 4o.akoYató ry
eperience 3s Pt desls with humanemoions.. Economtcs is
delined as aleisocalsciénce which
makes tooo39
Use of
osoence.
O, k3mple YopulYon ahsd 29ihuie
Under economics making use
o a me}hod called censUS whihsa
sthshcal tooLbut t
does not eveal aCwrate, ansoers uhile
estmaina
deals"wih homan componorts. Therelore, it1tGan popólakbn a6 iH
can be coneluded that
economisfssodsl Scencewhtch tnde mahe use of
5dence.
EConomics
* is an art:
()An art5define as pracHcal appication of ones
) Eton orcs, an hinoledge.es
aitmäkes us oj other ants likedrauing,
Paining , stinging ete and practically applies the
economi csooan earti whi dh stdies "about homn inouledge hence.e
devices methods to 'solvo the Problems i3nd
problems. 93
*l9 Conclude eco nontcs sb ?atl bó hit"an art"as e l l s
3s, oscience.
* Econo
micg is both postHve scien ce 25 wwell 3s noTmatve scence:
ositfve, 9cienceiis defineÀ as a sttence' which stdies conce pts as
they are. efettor example, maths, physics ete.
) No mattve Science preScribes a5 to, how, hiigs
should behave.
(Ð Economtes ts caled blendtng of bolh posthve
hormaHe setenceelot
tto For example, whecwe sluds cause s ofof poverty and
fnd solutonsato, Solve tie poblem'o povevsy eonomia
sciente'as
a nomaive
8cience. But the slatistical (acls and
and guts nela
poverty ae obtained moms slahskcso which is
* Therelore bican be oncluded that
etonomics blends
35pects o both post ives a5wel1 asnormaveblendsscteuAhe posPo s
pes of Ecorointcs:
Theree
(03
tio mÓin types oe esfmvoro529/seirgv
con omics korye
Micio
ecovmontcs deals oith, indivtduYl bu[iness units
(b Maco
econos deals wth 34regates (toBal) in'an
Micro economics studies
s0Ewhere as Macro about. 3: bu5iness
1 iol f n detsl
leslfaonom Studies about anindi
SterU56
sinpBe single
’ D#Cerence
businessurit. tn
Producingsame product
between Micro and Macro
Point ofE
DISeYence Microfonomtcs. Economics
Peaing1t Studies about indfvidual MaCro tConomicse
-Nbusiness untts in an économy
Studies gives 3
what?pichre comprehensj
about bUsiwenessOiwidert qives
Price cmprehense picpicv
It degls ,with
Product m Pes o anindustrycatsm
ndividud it dealswth aggega
Eauili biro |t deal s uath P al level od
Income
analysis ,eqyulbrjum lt deals th Total eajutl:bhon
i2ahalysp
1t deals with individwal
monelang poltuy o aincome b tot
deals with total incomeAms
,
business in
proiteconed
the industy by al
the
al)
Peals IB deals with person al , pr?vak, t deas wih natbral inome,
th? income , indtvitdual prodwct on , total productovi , total tonumpton
individual onisurnpton.york bwkordo h) evel
Methods o Eboromtes :
* Methodologu 99)0
delined as the logical process, o dtscovery on
deinonskratg he'' ruth,. t
* The otwó matn methdd o ecohomscs are:
T Deducthve Method :
case o deduchve method
conclusions are arriVed from
Some funà amental aS6um phons called
* ln ase3se o deduchve method Hypothesis.
method we pro ceed from General to
PerHculas. 1t is a
Abstract 0T PioY descending
Prior method. proceSs. , 1t is also Kn own as
*for exa ple, Al) Women are Mortal. Therefore, Feume is Mortal.
*The gollowi ng ee the assumptions made undeT this method
while arriving at conclust ons,
i) Man is always selfsh and wants to
gains
pomote his materiYl
Gi) Man warts to qet meximom
saislacton with mi nimum elfort.
(tt) Land is subject to dími ntsing meturm
(t) YopulaHon o any county nere•ses at
ropid rate.
* The main advantages o this
method are as foll ows:
) t uses a pure science called maths to arrive at conclusions,
gives valia obsenvahons and helps in
business models. deveoping usefol
*The dfsadvantages o this method are:
(t) t as5umes that must o the
pply to all indi duals whtchcharacteis ties od the grovp
maynd hold good in all
the caSes.
C) The 255umptions Under this
the indidugls.
wmethod may not apply 4o al
e
TL nducive Method:, observed drom collecBed
faots
*B slarts with ns . Ib is an ascending process 35 unde
genenal tonclusto to Genenal
method we proceed
exarmpk, a lamo us elono mtstMalthus
For
shdying dacts and gures
fopolaton after
in varoUs counties.
:bodksNohs
o 9
advanbages ol inductive mthodi wilotn sk
" The
mealis io în, . aBore as ithas no 25surnpions
0 t is more
Povides toolsfpr analysinq the collected facis ahd
tn t.
solotons soe the .toloth re
torhod
* The disadvantages o this method:
Calculafe ooN
be'n) Bis ariveny Complkalod , Cumbersome , ime- onsu ming' prO
of the 2 nods o1 econdmics,de ductve imethoddisis
methods
Used
Businesst Economics
Comnonly
defined as applicetion o ecopormic theory tohe concept
obusiness: management,a puritaY o£
* is also hnown. as, managerisecononmtc& ai b
-’ Charactert_Hcs feaho veso Bustness Eehnoteeuyol o
*1tIt involves anapplcgtion, 9 economy theonyor problem sdhing
* |t iS a.
as well las an'at,'whtch factttates better
managerial discipline. alsbory 289nievs
*lt exploes &increases sr the Nusage oeconomte toncepts in
nanagenial
irmum.
alocation of resouTces.
t provides, tools to tdentfu best
'glleinakve opton's/courses9
* Business economi cs is bastcall s micno in character but it tahes the
u
3ssistane 04 ma(o economics to aive a
Conclusions.
detail
takes tht help o macro econ ormics as
frm forms par, od an
indautry
ts bsically a normative
* 1t is veny explaraBoy in
science, whtch deponds onthe siqns
rnature s8s Tt gives tne
Scope. oBustness Economics ;
* Manageial economtcs deals with
the follouing aspects t
)Demand Functon a Demand Eshma tion:
Businesseconomics dealst denand analysis and' set o
Predictio ns which enable s5 mÝoh functioning o1, a busi ness
firm.
(t) Producion
Business
Analysis
:
e conomics
hd all
the
ep laws relahing to
ducion which helps."busines
irms to
(tt) Cost tahedec'
20009k sionsonpoductonseizc
analysts:
There aYe vaious types o cosks ke dhrect cost ,indire ct
Cost et. Cost, contoli
Ceduce
OSt
teihatues help a businessrm to
helps a bsiness Peduchon:
Arm to
BEP (Break even point) PIv Yato
() rof alternsHye"po'
proit
ranagement:e bsttesel32: boirsq SnllstcN albiliy.
Busine[s economics helps busiressf ms o adopt strategjes uwhicl
enables he irmto maiseru Rtsprots.pmets, t deals
deals with capital
mangemert gnd s les maragement yre koirsi is
’hole anà Irmportance odmanageital econorics:
Manageríal econoroks tsipraa matc (flerible)' as it mespond
changes qwichly.
Cokenned with analyical tools and techviages hat help
decision. making.tor bustness rms,or sth ued sNe
Business econontc3 proides an undeistanding od tha framework and
economico tools needed bybysinessmen as arn aid.to better de ciston
Implies he appication o
Managevtal economics unforsen Contengencies Onomt
pnetples to handle
economtcs helps in cisis
S
* Therefore ,Bustness
vnarag
in detsior imaking
Applica Hon od Business econ omlcs in detsion
enen
The following are Uses
decdsions
oManagerial. eornomcs in bug
Oppurtuntty. cost od badecision isi the cost o
the altenathve. for that decsion: It fs the next best
rot' a factoy input has applied.
Yanginal Cost (M), Marginal fevene (MR), BEP, Marginal Conegt
tr,
s
help business hrhs' An Aakth dedistons to ineyeose
proftabiliy
Tis Concept i5, used by, (business firms while taking decs
on captal investment o alloaton 'od dedsiond
(t) Time
TeSOUY(es.
In economics Time period is csstked as tous ot
aVery Short Period. less than or eaual 4otweeh]i
b Short Period.[less. than o
c Yedium Period èapalto yea]
[Move -Whan 4ueoM Sind Ness than
d Lona 6yeana
er Hence, Tine PebPechue helps. bysine s Ayms"in
CoTTect possi ble making he
decistons.
Atakes about the Tate t which gn
Ax6 to re at the iivestment is to be discountd
oiz Possiele Fes on theipmesentvalue arrive
basts o utone netuTnS, The Teturns
hae
Co mpared with. the eresent yave in order to, arrive at best
possible inwest ment decsion,
(v) Rrinciple od Gost Benelt Analysis; rogo sh hero
For any bustness decsion ost minimization and prot
maximi zoton are the two main okjecves. The economtc
principle oj ost BeneG4 analysis helps bUsiness rms to
choose an opton whichgies ft highe benef# when
66Compered to Cost.
’ Business Econonist:
Business Economi'st ?s defned % a person who spealzed in
business economics . Business Economist ís also known as Managenia
etonomis t.
’ functions o a Business Econorn? st } og 2 kemr
Ö Demand Es Horg kion and For castng has to be made bythe
business
economist ini rder to enable he top leve nanagermen
to take desions vela ina to -po ductio n, inventory etc.
(t) He conduc's an extensive studu af he business environment
and helps the managtment în in the formaton otbusiness plans.
by forecasting the futo re trends.
(ti) He has to co nduc a shudy of business operaions, 1ike
price Rxaton, investrmet (capita), invarntony schedule and
Gv) He has to pro vide a foCAst ochanges
business CondiHons based on
market researcl
ch and pdiy Snalysis
market SUTVey
(9 He has to undetake extensive S t anaysls of
Cormpeiion So hat
and determine Hhe naure and extent of
can devise appropriak strakgies to handle
management
Compeition.
) He should analuze the issues and problems present in he industm
and Suggest Suitabe, remedial actions to the
mana gem ent tor
implementation.
Mi) He has to dis co ver and USe Cast BeneRt anays's so that
2 irm ecaives maximum possible benefit with h mint
possble Cost.
malntatn contachwith
all posi ble data
(vti) He should possiHe Snd
estract as much
infomation as
copany
Overall dewelopment of Hhe
Contrbuk
(x) He should tevalubk captal budgeting andbyjld mico.
macio ecònom?d mo dels ha are,Usetud in
solui ngy
bugines
() He, should. btefhe management On uiet domestic àrd
lef4 to
Valwabe SOggoties
in global fssues, challenges and express his valuable
Ahe déscreHon oC
the mandgement. lt ts ofthe
’Uses and Advantages of Business Economics - efovoG9
Business economtcs is useful in the
*4 fs Praqmatc and flexible in
quichly to he nature ,Hence, it ada pts f45el0
prewat ling ConditHons in he
*t is loncer nedwi economy:
decston maklng in busin thanalyhca)tools
es TmS Sviensfyo
rat a1e us eful tor
+tisa Soluion for handlivg ska
appro prigte strateae to
YYO
and Chisis and giea
makes pmo handle unforse en
blem solviva easier and
perlormance ofobusiness rms impo ves theConingen cies.
qualtty and
* It helps in all
telds o Commerce ltke
Manaq umert Actounhug ete. Financi2rcitibo)2290vo
al Mansqenent ,Gt a
ft
92
