Business Economics: Importance, Scarcity, Market Operations and Structure

This essay explains the importance of business economics, concept of scarcity and choice, ways changes in economic environment affect business decisions, and influence of market structure on production and strategic decisions. It also discusses market operations and their impact on a company.

Business Economics

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Explanation of business economics along with importance of economics to manager...............1
Explanation of concept of scarcity and choice together with importance of opportunity cost in
decision making for business.......................................................................................................2
Explanation of the ways changes in economic environment affect decision of company and
organisational behaviour..............................................................................................................3
Discussing operations of market along with influence of market structure on business
production as well as strategic decisions.....................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business economics is application of methodologies along with theoretical concepts
concerned with economics for analysing enterprise and factors which contribute to diversity of
structures and relationship of corporations with capital, labor as well as product markets
(Castillo-Vergara, Alvarez-Marin and Placencio-Hidalgo, 2018). The term is used in variant
manner, for example, managerial economics, economics for business, industrial organisation, etc.
Changes within an economy impacts decision making of a business in form of earning more
customers, experience great opportunity for expansion, enhance profitability and so on.
The essay covers explanation and importance of business economics, concept of scarcity
along with choice and significance concerned with opportunity cost in organisational decision
making. It further highlights the ways in which changes in economic environment affect business
decisions and influence of market structure on production addition to strategic decisions of firm.
MAIN BODY
Explanation of business economics along with importance of economics to manager
The term business economics is related to applying economic approaches along with
economics to issues or challenges of framing rational decision making.
In accordance to Dominko and Verbič (2019), business economics is using methods
along with principles concerned with economics for the purpose of analysing complexities that
are faced by management or other kind of professional body at workplace and to assist in finding
key solutions which advance best interest on particular establishment (Dominko and Verbič,
2019).
Business economics as a subject assist in thinking strategically together with devising
rational decisions in order to optimise results. It is closely related to decision making process
which it generates and helps an individual to study all factors that impact working, management
along with prosperity of a firm. On other hand, economics as a subject is all about production,
distribution addition to consumption of products or services. With this, an individual studies the
ways in which people, governments, organisations and countries make choices for allocation of
resources.
Economics plays significant role to assist business managers along with decision making
of firms. One of importance of economics to business managers and firms’ decision-making is
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studies business environment. For example, managers of Aston Martin use economics to
properly analyse external environment in which the company operates. It assists in looking
towards factors which influence working of establishment and is taken into consideration at the
time of devising decisions addition to framing policies. Moreover, economics is important for
business managers as it guide in controlling costs. For a company, such as Aston Martin,
economics helps managers to estimate costs related to all organisational practices along with
identifying factors having potential to cause variation in costs. Another importance of economics
to business managers is bringing coordination. Economics helps business managers to bring
coordination along with flexibility within all operations and supports decision making with the
help of providing all relevant information by using economics tools and concepts.
Explanation of concept of scarcity and choice together with importance of opportunity cost in
decision making for business
The term scarcity is said to finite nature as well as availability of resources. It means that
people have huge demands than is available and limits individuals as well as society (Lee and
Jung, 2019). However, the term choice can be described to decision of an individual for sharing
together with making use of resources. Choice is an action to select from variant options or is
one of options which a person can choose from. For a company, such as Aston Martin, choice is
potential of producer or consumer to make decisions wherein product or resource to buy or
provide among diverse possible options.
Scarcity in economics is an economical concept that is used for referring gap among
availability of limited resources as well as theoretical requirements or choices of population for
resources (Daoud, 2018). As an outcome, business concerns are forced for making decisions
about how best to allocate resource effectively for meeting most of need together with wants of
consumers, government addition to business having alternative predictable. In association to
Aston Martin, scarcity have possibilities to limit choices that are available to consumers that
ultimately make whole economy.
Production Possibility Frontier can be said to an idea in an economy stating that production
factors are scare in number (Production-Possibilities Frontier, 2022). In other words, it is a
visual representation as well as an economic model related to ideal production balance among
two products provided finite resources. Likewise, opportunity cost is termed as price or cost of
next best alternative which is available to a company, investor or an individual. In a company,
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for example, Aston Martin, opportunity cost provides clear guidance and direction about decision
making to produce as well as essential to devise investment based decisions that are importance
of the concept. Within different economic systems, such as free market economy, opportunity
cost is significant as it assists in selecting possible options among all types of available options.
At same time, in Mixed economic systems, opportunity cost is important because it guide
individuals and business to use each possible resource effectively and tactfully for maximising
economic profits.
Explanation of the ways changes in economic environment affect decision of company and
organisational behaviour
Business external environment refers to composition to all outside influences and elements
which impact business decision making and behaviour of company. It is significant for
organisational managers to understand the ways in which extrinsic environment addition to its
factor impact changes on company (Vlados and Chatzinikolaou, 2020). In context to Aston
Martin, to analyse how changes in external business environment affects organisational decision
making and behaviour are analysed through PEST Analysis. It is strategic framework that is used
within environment scanning element of managing strategies. Business external environment is
important in aspect to PEST Analysis as it ascertains for managers together with strategists as
where their market at current duration stands along with where it head off in future. Description
of PEST analysis in association to Aston Martin are as below:
Political: In UK, political environment is managed and shaped by amount of intervention
of government in business affairs. For Aston Martin, general political stability and kinds of
legislation passed for regulating businesses impacts adversely on decision of company and
organisational behaviour.
Economic: Within UK, economy is market oriented wherein decision making concerned
with production, distribution along with investment to consumers are directed by price signals
generated from forces of demand and supply. In aspect to Aston Martin, one of economic factor
impacting decision of company and organisational behaviour is unemployment as low
unemployment rates creates hard times for managers to make decision for filling vacant
positions. Another economic factor that influences decision making and behaviour of company is
tax rates. Within UK, increase in tax rates states that employees are required to make payment of
more taxation on income that further results in consumers having less funds left to spending on
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offerings of establishment (Zolotoy and Et. Al., 2021). In relevance to Aston Martin, it impacts
negatively on decision of company and organisational behaviour as it expect to make sales less
which reduces its investment level. Inflation rate is also an economic factor that impacts on
decision of company and organisational behaviour. It is determined that inflation rate affects
decision related to workforce as it reduces potential for spending addition to saving.
Social: In UK, studying social elements through people’s crucial statistics is key for
variant business decisions. At present, Aston Martin must deal with unique needs, preferences
and choices of different generations, all requires different decisions for approaches related to
distinct offerings of company.
Technological: In UK, technological environment is expanding fastly. Within Aston
Martin, technological changes bring opportunities and benefits (Grassi and Vallati, 2019). For
example, new technologies, such as artificial intelligence, search engine optimisation, chatbots
and so on impacts decision of company and organisational behaviour through creating new
markets for establishments.
From the above explanation, it is concluded that changes in external environment affect
business decisions and the behaviour of firms. Within Aston Martin, economic climate of
economy impacts business decision making and behaviour of workplace. Investment decisions,
number of people the company employ and level of interest affects decision devised by managers
of the establishment.
Discussing operations of market along with influence of market structure on business production
as well as strategic decisions
According to Barber (2021), concept of market is all about composition of institutions,
infrastructures, systems, procedures along with social relations in which parties engage for
purpose of exchange (Barber, 2021). Marketing operation is said to function of administering
business’s marketing program, annual strategic planning addition to campaign planning
practices. In a company, for example, Aston Martin, market and its operations serves as
backbone of marketing function, governance and support that permit in delivering values.
In economics, demand and supply can be said to relationship among quantity of product
which producer prefers to sell at variant number of prices along with quantity which buyers
prefers to make purchase. In determination of prices, demand and supply is main model used in
theory of economics by a company. Within Aston Martin, demand and supply are considered as
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key determinants in market transactions among sellers and buyers for determining prices as well
as quantity on market that are in turn determined through conditions along with technology in
which human capital operate.
In a company, equilibrium price is considered as balance of factors related to demand and
supply. In context to Aston Martin, there is propensity for prices to return equilibrium unless
certain of its features of supply or demand change.
Figure 1 Supply and Demand. 2022
(Source: Supply and Demand. 2022)
From the presented diagram, it is analysed that at higher prices, there are more quality
supplied than demanded which results in seller having lower prices for selling goods (Supply and
Demand, 2021). In aspect to Aston Martin, equilibrium occurs at the stage when quantity
supplied is equal to quality supplied. When prices are under level of equilibrium, then quantity
demanded exceed quantity supplied.
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Market structure are the ways in which distinct sectors are classified together with
differentiated on the basis of degree as well as nature of competition for business offerings. One
of market structure is perfect competition that is said to large number of small businesses that
compete against each other. Key characteristics of perfect competition includes freedom of entry
as well as exit, standardisation of industry output and no company having a substantial share of
market. Another market structure is Monopolistic Competition that is characterised as an
industry wherein ample number of businesses offer products which are similar substitutes (Souza
and Aste, 2019). Imperfect consumer knowledge, number of companies, products and pricing,
slightly distinct offerings and profits are features of monopolistic competition. Oligopoly is
featured through significance of strategic behaviour. In such market structure, firms are able to
change quantity, price, quality and promotions for gaining benefits over rivals. Monopoly is
market structure wherein differentiated are done as per number of buyers or suppliers in market.
For example, in Aston Martin, managers perform business practices with perfect competition
market structure in which prices are usually lower that depends on demand elasticity as well as
enhancement of returns to scale. Under perfect competition, ample number of purchasers and
seller exists and prices reflect demand along with supply. It influences decisions and strategies of
Aston Martin through assisting in earning enough profit for staying in business along with drive
revenues down.
In a company, for instance, Aston Martin, market operations are important as it assist
business to define long term objectives, provide oversight that are necessary for keeping
establishment on course and ensuring high investment returns. In contrary, restricted dealings,
precautions for stabilising securities market related to government, lack of well-developed
securities market, complexities in execution and contractions among open market operations to
that of bank rate are some limitations related to market operations.
CONCLUSION
From the above information, it is concluded that business economics assist in developing
relationship among distinct factors of economy, including market structure, income and so on.
Scarcity states that demand for specific product is more than its availability in market due to
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which it limits choices that are available to consumers that make whole economy. Concept of
opportunity cost is cost associated with sacrifice of available opportunity. Market structure are
significant to a company as it impacts on market results through impacting on opportunities,
motivation as well as decisions related to economic actors in a market.
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REFERENCES
Books and Journals:
Barber, B., 2021. The absolutization of the market: Some notes on how we got from there to
here. In Constructing the Social System (pp. 217-234). Routledge.
Castillo-Vergara, M., Alvarez-Marin, A. and Placencio-Hidalgo, D., 2018. A bibliometric
analysis of creativity in the field of business economics. Journal of Business
Research. 85. pp.1-9.
Daoud, A., 2018. Unifying studies of scarcity, abundance, and sufficiency. Ecological
Economics. 147. pp.208-217.
Dominko, M. and Verbič, M., 2019. The economics of subjective well-being: A bibliometric
analysis. Journal of Happiness Studies. 20(6). pp.1973-1994.
Grassi, A. and Vallati, M., 2019, May. AI to Facilitate Legal Analysis in the PESTLE Context.
In Proceedings of the 2019 Emerging Technology Conference. University of
Huddersfield.
Lee, S.Y. and Jung, S., 2019. Shelf-based scarcity and consumers’ product choice: The role of
scarcity disconfirmation. Social Behavior and Personality: an international
journal. 47(5). pp.1-10.
Souza, T. T. and Aste, T., 2019. Predicting future stock market structure by combining social and
financial network information. Physica A: Statistical Mechanics and its Applications.
535. p.122343.
Vlados, C. and Chatzinikolaou, D., 2020. Methodological Redirections for an Evolutionary
Approach of the External Business Environment. Journal of Management and
Sustainability. 9(2). pp.1-25.
Zolotoy, L. and Et. Al., 2021. Mood and ethical decision making: Positive affect and corporate
philanthropy. Journal of Business Ethics. 171(1). pp.189-208.
Online:
Production-Possibilities Frontier. 2022. [Online]. Available through: <
https://corporatefinanceinstitute.com/resources/knowledge/economics/production-
possibilities-frontier/>
Supply and Demand. 2022. [Online]. Available through: <
https://www.intelligenteconomist.com/supply-and-demand/>
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