Business Economics

Micro
Definitions

Micro economics is the study of a single buyer

or a group of buyers in a market and single
supplier or a group of supplier of the same
product or similar product.
Micro economics is the study of the behavior
of individuals as consumers and firms as
suppliers.
Micro Economics Variables
Price
Firm
Output of a firm
Income of a buyer
Profit of a firm
Cost of production
Wages
Interest on capital
 Assumptions of Micro Economics
Rationality
Full Employment
Price of a product is given
Perfect Competition for all factors of
production is assumed except one that is
considered as variable
Perfect Competition in product market
 Business Economics (Micro)
A combination of business and economics
Definition by Richard Mariam and Malcolm McNair
“The mode of thought to solve any business situations
or problems”
Definition by Savage and Small
“ The direction given to achieve certain objectives of the
firm by using men and material resources”
 Nature of Business Economics

Business economics is micro in nature

Business economics uses price as a link between other micro variables

Business economics expresses the value of all goods and services in

quantity or value of a single product.

Business economics uses normative and positive approaches

Business economics cover both deductive and inductive method

Nature….
Business Economics studies and considers other
disciplines for better understanding of human behaviour in
relation to Business.
It includes Mathematics, Statistics, Econometrics,
Sociology and Psychology
 This makes Business Economics realistic in
approach
Scope of Micro Economics
Micro economics studies individuals and their
behaviour.
 Individual firms and consumers
Demand and demand analysis
Supply and supply analysis
Production and cost
Pricing of a product under various market structures.
Revenue and profit
Pricing of a factor of production
Scope
Scope is the area which the subject covers

The knowledge of Micro

Economics is the most
precise and
comprehensive to
understand behaviours of
consumers and suppliers
 Limitations of Micro Economics

Considers Partial Equilibrium

Micro variables are considered and macro level
decisions are ignored.
Paradox of savings give rise to conflicting objectives for
macro economics analysis
The assumptions are large in number, therefore they
are difficult to comprehend to explain the real problem
in the economy.
Examples such as existence of perfect competition and
full employment level are unrealistic.