Role of Economics in Business Decision Making

Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Economics and Business economics...........................................................................................3
Relationship between Economics and Business environment.....................................................3
Role of Economists......................................................................................................................4
Fundamental economic problem and firm behaviour..................................................................4
Economic systems.......................................................................................................................5
Demand and its factors................................................................................................................6
Change in demand and Quantity Demanded...............................................................................6
Supply and its factors...................................................................................................................8
Market Structure..........................................................................................................................9
Consumer Behaviour and Firm Production Decisions................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
In this study highlights the economics and its components put effects on the business
decisions and firm’s behaviour. A description of economics and its relationship with the business
environment is explained. Also the types of economic systems with demand and supply along
with its factors are mentioned (Spulber, 2019). At the end the structure of market with types of
imperfect competition and consumer behaviour and firm’s production decisions are outlined. So,
the whole study will describe the functions of business economics that influence the economy
and business decision making and will provide information how demand and supply effects the
economy.
MAIN BODY
Economics and Business economics
Economics is a discipline of the economy that help in the decision making. It analyse the
use of resources that are scarce and limited. Economics deals with the factors of production and
consumption of goods and services. It helps to understand the functions of production so the
businesses would take informed decisions to produce enough goods and services that satisfy the
needs of the consumers. The economics is divided into two categories i.e. microeconomics that
focus on the individual level and factors that effects the decision making of an individual and
macroeconomics that focus on the whole economy of a country and factors that influence the
economy as a whole. Also, Business economics is a field of economics that integrate economic
theories and models within the business practices to facilitate business decision making
(Carriere-Swallow, and Haksar, 2019). It focuses on the factors that are contributing to the
structure of business i.e. capital, labour, taxes and so on. Business economics help the managers
of the organisations to analyse issues arises in the business and provide alternate course of action
to take effective decisions. Business economics link business structure and practises with
economic theories and models which provide both micro and macroeconomics tools and
techniques to optimise business functions.
Relationship between Economics and Business environment
The role of economics in the business environment is understand the impact of micro and
macro factors of the business. Micro factors creates direct impact as it concern with the areas
within which the organisation operates. It consist of customers, suppliers, competitors and
public. These factors creates influence over the supply, demand and overall functioning of the