Defining ‘Business Economics’
Business economics is best described as the field of applied economics that is primarily devoted to studying the organizational, financial, market-related and environmental challenges that corporations face. Business decisions are made by effectively utilizing economic theory and quantitative methodology. Subjects such as business organization, management, expansion, and market strategy are all analyzed in Business economics. Studies might include how and why a company would expand, the impact of entrepreneurs, the interactions among individual corporations and the effect of governmental regulation.
‘Business Economics’ Broken Down
Economics refers to the study of the components and functions of a particular marketplace or economy, such as the impact of the concept of scarcity, and supply and demand. Other important subjects of study within an economy are production factors, distribution methods, and consumption.
Factors Within Business Operations
Business economics places the focus on the factors within the operation of the business and how that is related to the economy in its entirety. It addresses economic principles, standard business practices, strategies, acquiring necessary capital, generation of profit, the efficiency of production and overall management strategy. Business economics also considers the study of external economic elements and how they will influence business decisions such as a change in regulations or an unexpected price change in raw materials.
Managerial economics considers the microeconomic factors that pertain to the decision-making process within an organization. Companies make strategic decisions that can affect profit or loss. Managerial economic principles are used to influence and guide corporate strategy and decisions.
Managerial economics apply to both the private and public sectors and for-profit as well as not-for-profit organizations. All organizations need to pay attention to the internal and external economic conditions to remain solvent because all organizations require continuous funding in order to continue operations. The goal of managerial economics is to use all available resources to maximize production while at the same time minimizing waste.
Although nonprofits will focus on raising donations, for-profits instead emphasize the sale of goods or services. Each organization attempts to limit waste in order to maximize the overall usefulness of the resources available to them. Each type of organization utilizes the same basic principles to meet their associated goals of maintaining the required capital to continue to function within the economy.
Both for-profit and nonprofit organizations alike will perform similar business functions and require similar knowledge. For example, all types of organizations engage in marketing, community or customer support and require leadership to make sound strategy decisions.
The professional association for business economists in the United States is the National Association for Business Economics (NABE). The mission of the organization is “to provide leadership in the use and understanding of economics.” The United Kingdom has the equivalent organization called the Society of Business Economists.