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It is a business economics note comes under KTU for second year students
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, EJAZ ALI HAROONMEA Engg. College
Module – 1:-Business Economics and its role in managerial decision making-meaning-scope-relevance-
economic problems-scarcity Vs choice - Basic concepts in economics-scarcity, choice, resource allocation-
Trade-off-opportunity cost-marginal analysis- marginal utility theory, Law of diminishing marginal utility
-production possibility curve.
Economics
If I have Rs.100 in my hand, should I have a chicken biriyani or use it to have a hair cut?
If the government wishes to start a new project with certain crores of rupees, should they invest in road
development or in poverty eradication programs?
What are the different methods by which a person, family, society and a nation acquire wealth and
how do they spend them in different areas like food, shelter, entertainment etc?
Economics is a social science that tries to deal with these kinds of problems. We have got a fixed amount of
resources in our hand and how we can efficiently use these resources to gain maximum is the basic problem in
many aspects of life. Economics studies these problems. Definitions given by various economists are:-
--Economics is a science which studies human behaviour as a relationship between ends and scarce means
which have alternative uses.
--An enquiry into the nature and causes of wealth of nations.
Business Economics
Faris is appointed as the manager of a smartphone company. As the manager, Faris has to come across
different problems like:-
a) How many number of smartphones should be produced in an year?
b) How many quantities in different versions of the smartphone should be produced?
c) In what proportion, the total available capital has to be distributed to manufacture different versions of the
product?
d) How many employees have to be employed in different divisions of the company to fasten the production
process and gain maximum profit?
Maximizing gain from the given resources like capital, labour, land, technology, time, skills etc is the main
objective of a business firm. So inorder to maximize the gain and to address the problems as mentioned
above, a manager has to make use of economic theories and analytical tools in decision making process.
Business economics is the branch of economics that deals with the application of economic theories,
principles, analytical tools etc to the decision making process within a business unit, thereby to attain the
desired economic goals.
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