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Topics Covered in Business Economics Lecture Notes
The Topics of the Business Economics Notes are as follows-
- Economics- Meaning, Nature and Scope- Micro and Macro Economics.
- Central Problems of an Economy.
- Economic Systems- Types and Features.
- Introduction to Business Economics: Nature and Scope.
- Business Economics Decision Process, Fundamental Concepts.
- Basic Tools in Economic Analysis, Fundamental Relationship between Economic Variables.
- The Function; Objectives of Firm, Baumol Theory and Behavioral Model, Profit Maximization as the goal of Corporate Firms.
- Limitations of Economic Theories.
- Theory of Demand: Meaning, Law of Demand, Types of Demand, Factors affecting Demand.
- Marginal Utility Analysis and Analysis of Consumer Behavior: Cardinal and Ordinal Utility Approach.
- The Elasticity of Demand- Meaning, Measurement of Elasticity of Demand and its implications in the decision-making process.
- Introduction to Demand Forecasting- Role, Types and Methods.
- Production and Cost Analysis; Meaning of Production, Production Function.
- Least Cost Combination of Inputs, Factor Productivity and Returns to Scale.
- Cost Concepts- Traditional and Modern Theory of Costs in the short run and long run, Economies of Scale.
- Market Structure and Firm’s equilibrium.
- Concept of Revenue, Break Even Analysis, CVP Analysis.
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Business/ Managerial Economics Important Questions and Answers
- Define the Nature and Scope of Economics.
- Difference between Micro and Macro Economics.
- Define Capitalism, Socialism, Mixed Economy and along with its features.
- Explain the Decision Making Process of Business Economics.
- Explain Baumal Profit Maximization Theory along with its assumptions and arguments.
- Define the Law of Demand. Also the Types of Demand and Factors affecting Demand.
- Explain the Elasticity of Demand and its types.
- Demand Forecasting, Types, Steps, Scope, Levels and Methods.
- Define Production Function, features, Types- Short-Run and Long-Run Production Function.
- Economies of Scale, Types- Internal and External Economies.
- What is the Perfect Competition? How are its Price and Output fixed under this Competition?
- What is Monopoly Competition? Price and Output Determination.
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Conscious of whether to buy our Notes or not. For You, I have written about the Introduction of Business Economics Notes which comprises of its Meaning, Nature, Scope, Micro and Macro Economics and its Difference.
Introduction to Business Economics
Economics is the study of how Human Beings do the choices to allocate scarce resources to satisfy their unlimited wants in such a manner so that the customers, producers and society can maximize their satisfaction, profits and social welfare.
Business Economics or Managerial Economics may be defined as the study of economic theories, logics and methods of which are applied to get the solutions of practical problems of the business.
Managerial Economics is concerned with the application of Economic Concept and analysis of the problem for formulating the rational managerial decisions.
Nature of Economics
Nature of Economics is divided into two parts- Science and Art.
Economics as Science refers to the principles which are universally applicable. It is divided into two parts- Positive and Normative Science.
Positive Science confines itself to the accurate description of the phenomenon which comprises of What it is, How it works and What are its effects.
Normative Science is a body of Systematized Knowledge relating to the criteria of what ought to be and concerned with the ideals as distinguished from the Actuals.
Economics as Art refers to solving the practical problems of an Economy.
Scope of Business Economics
- Subject Matter of Economics is Dynamic. It has a wider scope consisting of the Production, Investment, National Income and lot more.
- Economic Systems- Capitalism (private ownership), Socialism (public ownership) and Mixed Economy.
- Economic Policy- Fiscal and Monetary Policies.
- Applied Economics comprises agriculture, transport and industrial economics.
- Micro (small) and Macro Economics (economy as a whole).
Micro Economics is the theory of the small behaviour of the consumers, producers and the market. It deals with a small part of economics.
Scope of Micro Economics
- Law of Demand- It shows the relation between the Price on Demand and vice-versa. If Price Increases, the demand decreases and vice-versa.
- Theory of Production- Theory of Production comprises various decisions taken by the firm on no. of factors like what to produce, when to produce, how to produce, how much raw material required and how much will it use.
- Theory of Price Determination- In this Theory, the prices of the product is determined by the law of Demand and Supply in the Market. Customers have a desire for the product and manufacturer produces according to demand. If the Demand is high, then there will be an increase in the prices and vice-versa.
- Theory of Factor Pricing- Theory of Factor Pricing deals with the determination of the Four Factors of Production- Land, Labour, Capital and Enterprise. The Prices that an Entrepreneur pays for availing the services of these factors are known as the Factor Pricing.
- Optimum Allocation of Resources- In this, the Firm decides the price by optimum allocating the resources to the right place at the right time.
Importance of Micro Economics
- Operation of an Economy.
- Managerial Decision.
- Economic Policies.
Limitations of Micro Economics
- Limited Scope
- Unrealistic Assumption
- Wrong Conclusion
- Economic Policy
- Micro View
It is that part of the theory which studies the overall average and aggregate of the system. It concerns such variables as the aggregate volume of the output of an economy with the extent to which its resources are employed with the size of National Income and with the General Price Level.
Scope of Macro Economics
- Theory of National Income- Macro Economics is necessary for evaluating the overall performance of the economy. With the invention of the 1930’s Great Depression, it is necessary to analyze the causes of general production and unemployment. This led to the data construction on National Income. It helps in forecasting the Economic Activity Level and to know the Income Distribution among different people groups in the Economy.
- Theory of Employment- Redundancy is caused by the deficiency of the actual demand. In order to improve this, effective demand should be improved by increasing the total Productivity, Income, Investment and Consumption.
- Theory of Money- In Macro Economics, it’s been said that the monetary problems can be understood and analyzed properly. Frequent changes in the inflation, deflation, value of money can affect the economy badly. This can be improved by adopting the Fiscal, Monetary and Direct Control Measures for the economy as a whole.
- Theory of Economic Growth- On the Basis of Macro Economics, the capabilities and resources of the economy are evaluated. Plans are framed for the overall increase in the National Income, Output and the Employment and also implemented so that to raise the Economic Development Level as the whole.
- Theory of Business Fluctuations- Macro Economics is an approach to Economic Problems after the Great Depression. Thus, the Importance of this Theory lies in analyzing the causes of Economic Fluctuations and to provide the remedies for the same.
Importance of Macro Economics
- It helps in understanding the functioning of an economy.
- Formation of Economic Policy and formulation.
- Control over Trade Cycles.
- Change in the General Price Level.
- Study of National Income.
- Helpful in the study of Micro Economics.
Limitations of Macro Economics
- Conclusions may be wrong.
- Heterogeneous Units.
- Different Effects of Aggregate whether positive or Negative.
- Aggregates which compose the system may not be significant.
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Difference between Micro and Macro Economics
|Basis of Difference||Micro Economics||Macro Economics|
|Meaning||Micro Economics deals with the economic issues related to small economic unit like consumer, household, interest etc.||Macro Economics deals with the economic issues af the level of the economy as the whole.|
|Concerned with||It is basically concerned with the determination of price in the market according it is often known as the Theory of Price.||It is basically concerned with the determination of the aggregate output and general level in the economy as the whole according to it as often known as the Theory of Income.|
|Assumptions||Study of Micro Economics assumes that the Macro Variable remains constant. Thus it is assumed that the General Price Level is constant while we are studying the Price Determination in the Individual Unit.||Study of Macro Economics assumes that the macro variable remains constant that is assumed that the Distribution of GDP remains constant when we are studying the level of GDP in the Economy.|
|Principle Components||Principle Components of Micro Economics are Theory of Producers, Behavioral, Price, Consumer Behavior etc.||Principle Components of Macro Economics are related to the equilibrium level of expenses and outcome, inefficiency and deflation gap in economy, fiscal and monetary policies, govt. budget, Money Supply and Credit Creation, Exchangs Rate and Balance of Payment.|
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