BUSINESS ECONOMY

PROFF. P.SWAMY
G.KRISHNAVENI
SOCIAL ECONOMIC
No monetary consideration All business activities are
Eg. Mother in terms of love economic activities, but
all economic activities are not
business
BUSINESS
The activities which
are involved in
customer identification,
customer orientation

eg; consumption & satisfaction.

• are skills that can be learned
• at all ages. students need to be reminded eg; production & distribution
• that even adults continue to learn social
• skills. Students need to understand the
• importance of using effective social skills.
• ECONOMICS
"Economics is the science which studies human
behavior as a relationship between given ends and
scarce means which have alternative uses."

The study of how societies allocate and manage their scarce

resources.
 Economics includes the study of labor, land, and investments, of
money, income, and production, and of taxes and
government expenditures. Economists seek to
measure well-being, to learn how well-being may
increase overtime, and to evaluate the well-being of the
rich and the poor
• BUSINESS AND ECONOMY

GLOBALIZATION

“What do you want to be when you grow up?”

The impact of new Information and Communication Technologies has
changed the way people learn, work and live. Despite these
advantages, the reality is that many people work hard and are
underpaid for their labor. The current form of globalization primarily
serves the interests of powerful nations and corporations who shape
the terms of world trade. Many factory workers and field laborers are
exploited by large companies and paid rupees products that sell for
large profits.
Globalization is not a trend or a fad. It is the international systems
that replaced the Cold War system. It has its own rules, logic,
pressures, and incentives that will, and do, affect everyone's
country, and everyone's company, and everyone's community,
either directly or indirectly.
 The simple definition of globalization is the
interweaving of markets, technology, information
systems and telecommunications systems in a
way that is shrinking the world from a size medium
to a size small, and enabling each of us to reach
around the world further, faster, deeper, and
cheaper than ever before. That's what
globalization is.
WANTS AND RESOURCES, FOUNDATION FOR
BUSINESS ECONOMY.
THE TWO FUNDAMENTAL FACTS;-

THE WANTS OF SOCIETY ARE UNLIMITED

THE MEANS OR ECONOMIC RESOURCES

FOR PRODUCING THE GOODS AND
SERVICES TO MEET THESE WANTS ARE
LIMTED.EG; RICE, PENCILES ETC.
DEMAND AND SUPPLY
ECONOMICS CAN BE SUMMED UP IN A SINGLE
PHRASE
“DEMAND AND SUPPLY ”
COMMODITIES AND SERVICES ARE DEMANDED FOR
THE UTILITY THEY GIVE.
SINCE COSTS DETERMINE SUPPLY,AN ANALYSIS OF
COSTS, REVENUE AND PRODUCTION FUNCTION IS
MADE.
• CARDINAL AND ORDINAL UTILITY

THE TERMS CARDINAL AND ORDINAL ARE

BORROWED FROM MATHEMATICS.THE NUMBER
1,2,3ETC ARE CARDINAL AND THE NUMBERS FIRST,
SECOND, THIRD ETC ARE ORDINAL.
THE CARDINAL UTILITY ANALYSIS QUANTIFIES THE
SATISFACTION AND ORDINAL UTILITY ANALYSIS
MERELY SUGGESTS THE QUALITY AND RANKING OF
THE LEVELS OF SATISFACTION
 MARSHALLIAN UTILITY ANALYSIS-
CARDINAL APPROACH.
MEANING OF UTILITY;-
THE TERM UTILITY IN ECONOMICS REFERS TO THE
WANT SATISFYING POWER OF A COMMODITY.ANY
COMMODITY WHICH SATISFIES A WANT DIRECTLY
OR INDIRECTLY IS SAID TO POSSESS UTILITY.
 TOTAL UTILITY(TU) AND MARGINAL UTILITY(MU)

TOTAL UTILITY IS THE UTILITY DERIVED FROM THE

CONSUMPTION OF ALL THE UNITS OF THE DISPOSAL OF THE
CONSUMER.
TUn= Mu1+Mu2+MU3…………Mun
MARGINAL UTILITY IS THE UTILIY OF AN EXTRA UNIT.ITS THE
UTILITY OF A ‘n’ UNIT.

Mun= TUn – tun-1

 MARSHALL PROPOUNDED TWO
FUNDAMENTAL LAWS;-

1.THE LAW OF DIMINISHING MARGINAL UTILITY.

2.THE LAW OF EQUI-MARGINAL UTILITY.
ANALYSIS OF DEMAND
DEMAND = DESIRE AND DESIRE TO BUY

+ WILLINGNESS TO PAY

+ABILITY TO PAY
 Dd FUNCTION

D=f(p,ps,y,T,P)
D= demand
f=function
p=price
Ps=prices of substitutes
y=income
T=tastes
P=Preference
 Marshall defined Demand as
“ the graeter the amount to be sold, the smaller must
be the price at which it is offered in order that it may
find purchasers”i.e.., demand for a commodity is a
decreasing function of price.
Types of demand;-

1. Price demand
2.Income demand
&
3.Cross demand
 Price Dd;-
it refers to various quantities of a commodity or
service that a consumer would purchase at a given
time at various prices .
Income Dd;-
it refers to the differenet quantities of goods and
services which the consumer would buy at different
levels of income .
 Cross Dd;-

It refers to the different quantities of a commodity that

consumer will purchase with a change in the price of a
related commodity.The commodity may either be a
substitute or a complement. For eg; tea and coffee for
substitute
bread and butter for complement .
Factors causing changes in
Demand;-
income
taste and fashion
price of related goods
climate or weather change
population
quantity of money
savings
conditions of trade.
 SUPPLY
Supply is related to the behaviour of the producer.

Meyers defines supply as “a schedule of the amount of

good that would be offered for sale at all possible
prices at any one instant of time or during any one
period of time, for eg, a day, a week and so on in
which the conditions of supply remains the same”.
“ a rise in price tends to increase in
supply and fall in price tends to
decrase it”
 Supply function
S=f(p)
S= supply
f= function
p=price

“thus supply is an increasing

function of price”.
Factors influencing supply
1.the goals of the firm
2.price of the commodity
3.prices of factors of production
4.the state of technology
5.government policy
6.future price expectation
7.political disturbance