DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : K.DORASWAMY
Designation : Lecturer in CCP
Institute : Govt. Poly. for Women,
Kakinada
Semester : V Semester
Subject : Business Economics
Subject Code : CCP-502
Duration : 50minutes
Major topic : Scope of Economics
Sub Topic : Significance of Business
Economics (Micro& Macro)
Teaching Aids : PowerPoint, Animations
CCP502.4 1
Objectives

On the completion of this Period , you would be

able to know:
 Define Business Economics

 Explain the nature and scope of Business Economics

 Define Micro Economics and explain its features

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Recap

So far, we have dealt with

 Economics as Wealth

 Economics as Material Welfare

 Economics as relationship between ends and scarce

means

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Business Economics

 Managerial Economics == Business Economics

 Managerial economics was formerly known as

business economics

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“Managerial economics consists of the use of
economic modes of thought to analyse the
business situations”
- Mc Nair and Meriam

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“Managerial economics is the integration of economic
theory with business practice for the purpose of
facilitating decision making and forward planning by
management”

- Spencer and Siegel man

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Features of Business Economics

 Deals with the application of economic theory to

business management.

 Study of the firm and how it makes its decisions

 Bridges the gap between abstract theory and

managerial practice

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Business Economics Deals With

 Demand analysis

 Cost analysis

 Pricing practices and policies

 Profit management

 Capital budgeting

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Main Characteristics

 Micro in character
 Theory of the firm
 Depends on macro-economics also
 It is pragmatic
 It is normative

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Application To Business Management

 Estimation of economic relationships

 Prediction of relevant economic quantities
 Using it in decision making and advance planning
 Understanding the external factors-influence and
affect the business firm

CCP502.4 10
Uses of business economics

To Solve Some of The Problems like:

 What products and services should be produced
 What production techniques shall be used
 What inputs shall be used

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Contd.,

 What should be the quantity of output

 What should be the selling price
 When shall the equipment be replaced
 What is the best size and location
 Capital allocation

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Micro And Macro Economics

Modern economic analysis divides the study of

economics into two parts:
 Micro economics
 Macro economics

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Micro Economics

 It was first used by the economist Ragner Frisch in the

year 1933
 Micro means-Millionth part
 Small part or component of the whole economy that we
are analyzing

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Micro Economics deals with:

 Small units of the economy

 Individual consumers
 Producers
 Firms
 Prices
 Wages
 Incomes

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Determination of prices of goods:

 Demand theory—production and cost theories

Determination of prices of factors of production

 Wages-rent-interest-profits

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 Micro economics is also called “price theory”
 The main subject of the study is the price mechanism

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Limitations

 Based on unrealistic assumptions

 Complete free enterprise economy no longer exits
 Neglects the whole-gives an incomplete picture
 Thus micro economics forms only a part of economics
and a method of analysis

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Importance Of Micro Economics

 Helps us to find out the working of the individual units of

the economy

 Explains the working of free enterprise economy

 How prices are determined

 Condition of efficiency in production and distribution

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Scope And Subject Matter

 Determination of prices of goods and services

 Distribution theory-determination of factor prices
 Welfare theories
 Public finance
 International trade
 Foreign exchange rate

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Summary
We have so far discussed
 Business Economics
 Importance of Business Economics
 Micro economics

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Quiz

1. Micro economics means?

A) study of National income
B) study of total economics
C) study of small units of the economy
D) study of microscopic instruments

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Frequently Asked Questions

1) Define Micro Economics

2) List the distinctive features of Micro Economics
3) Features of Business Economics

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