Business Economics: How Economic Changes Affect Firm Decisions

This essay examines the influence of economic changes on business decisions and firm behavior, focusing on market operations and structure. It defines business economics and its importance to managers, highlighting concepts like scarcity, choice, and opportunity cost. The essay uses the Production Possibility Frontier to illustrate opportunity costs and discusses the external environment's impact using PEST analysis, covering political, economic, social, and technological factors. It also explores market structures, including perfect competition, monopolistic competition, and oligopoly, emphasizing the role of demand, supply, and equilibrium. The essay concludes that business economics is crucial for understanding market dynamics and making informed business decisions and students can find the complete essay along with other resources on Desklib.

Essay- Business
Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Business economics how changes in the economy can affect business decisions and the
behaviour of firms with a discussion on the operation of a market............................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business economics is the study of the economic theories, methods and the reasoning
which are being formulated and used in meeting out various challenges in the real world. This
respective essay will outline the business economics and certain roles of economics for the given
manager for the better decision-making process(Hauser, Eggers and Güldenberg, 2020).
Moreover, This will demonstrate the various concept that scarcity, choice and opportunity cost in
the economics. This respective essay will cover the use of production possibility frontier to show
and enlighten its importance of opportunity cost in certain economic system.
MAIN BODY
Business economics how changes in the economy can affect business decisions and the
behaviour of firms with a discussion on the operation of a market.
Business economics is the area of the development which is being evaluated as the
financial, environmental issues and market issues which are being faced by the company. There
are different concepts which are further explained in this such as scarcity, distribution and
consumption. It is the goal of the manager for ensuring the better team by which they can attain
the entire working of the company and they must set the abilities which are connected to the
economics with leadership and management. Economics is the major part of the business which
plays the significant role in the development of the company as the manager will be able to find
out about the various patterns of macroeconomics and they are able to monitor the constant
variation within the economic business environment. This also helps in giving advice to the
management by which monetary policies are being framed.
Scarcity is the finite nature of resources as ell as their availability as this basically shows
that people have more choices and wants in comparison to the resources that are limited to the
society. On other hand, choice is process or the action of selecting any particular products out of
the available resources which are being available to them. Companies such as Bentley, choice
refers to the individual preferences in order to buy the particular goods and services. Business
economics the study of the businesses and the certain variables which is leading to have the
diversity of the various corporate structure and also the relationship in the labour, capital,
products and labour which are using economic tools and theoretical approaches. This respective
phase is being used in a variety of ways that includes management economics, industrial

organisation, business economics and many more. Variation in the economy can directly impact
the overall decision-making in term of gaining more consumer, experiencing tremendous for
ensuring higher profitability and resources
Business economics is the process of logical thinking and decision-making by which they
can maximise the results and it is directly connected to the decision-making process which leads
to create and help an individual in studying all such factors which are going to affect the overall
functionality of the business and its success. Whereas, economics is all about manufacturing,
production, distribution and the consumption of an organisation. An individual make the better
use of this research to understand how the people, nation, companies and government are doing
allocation of the resources. In economics, scarcity is defined as the disparity among the
availability of restricted resources and their requirement and the choices of the people. As a
results of this, concerns are complied with the judgements on how the best distribution of the
resources can be done so that they can rightly ensuring the proper working of the company. In
context to Bentley, scarcity has to the potential to restricted their customer operations that affects
the overall working of the economy.
Possibility of Production A frontier is the aspects which states that the factors of
production are limited and in order to put in different way, it is the visual depiction also an
economic model which ensure the ideal production and its balance among two finite resources
(Barber, 2021). On the same hand, opportunity cost is the the prices of chosen factor which could
be firm, investors and the individual. In also helps in the clear direction and guidance which is
related to the decision-making in order to create and develop investment-based decisions which
are vital to the idea in companies such as Bentley, Opportunity cost is also vital in various
economic system for say free market structure, it helps in selecting of feasible alternatives
among various shorts of possibilities. On the same time, opportunity cost is vital in mixed
economy as it helps to guide the people and the businesses for available resources so that they
can ensure better earning in the economy.
External environment is defined as the sum total of all the external factors and
components which are having major impact on the overall decision-making of the firm. This is
important for the company and the manager to understand the external environment so that they
can cope-up with the given situation in order to have the better functionality within the
organisation. PEST Analysis is being conducted in order to understand the business environment

in relation to the Bentley and also explains that how the variation in the macro factors
environment in inflecting the overall decision-making and the behaviour of the company. This is
the framework which is being used in the managing strategic environment scanning
section(Grégoire and Cherchem, 2020). As the external environment is vital in term of PEST
Analysis as it assist the manager and the strategies in which the market is now and where it is
being headed in the near future. Following are the factors in consideration to Bentley are given:
Political: It is being claimed that the political environment is being handled and formed
by the level of government interference in commercial issues, their policies and the stability and
the type of legislation which is implemented to ensure to regulate the firms have a negative
influence on Bentley and its overall decision-making.
Economic: These are the factors which is related to the taxation, policies, distribution and
growth in the target market which makes the better use of its resources and its implications in the
target market. In relation to Bentley, unemployment is one of the economic factors which is
impacting and influencing the overall working of the company. Tax rate is the another economic
issues which impact the overall decision-making of the company. Rise in the tax rates in UK
means that the employees have to pay more tax on their income which leads to reduce their
purchasing power to buy certain products and services in the target market. In consideration to
Bentley, there is the negative impact on the overall decision-making of the firm and the
organisational behaviour since they are expecting to earn less sale in the market and the lower
level of investment. It is also known that the inflation is the another issues which is having major
impact on the overall decision-making. This is being analysed that the rate of inflation is having
the major impact on the company since it has been possibility for spending as well as saving.
Social: It is being analysed that the social components through the people are vital data
and it is critical for having the various business decisions(Trinugroho and Lau, 2019). In context
to Bentley they are effectively coping-up with the changing demand, choices and the interest if
the various generations and it is necessitates various approaches to the company's offerings.
Technical: It is known that the technological environment in United Kingdom is
continuously increasing and this basically provide the chances and the advantages to the Bentley.
As the new technology that includes artificial intelligence, chatbots, SEO and other related
technologies. For instance, there is the major influence on corporate and organisational
behaviour by having the new market for the companies.

Change in the macro environment is having the major impact on the overall decisions and
the behaviour of the company to all the preceding arguments. It is the state of economy which is
having major impact on the business decisions and workplace behaviour at Bentley. Investment
decisions, as the amount of employees which is being employed by the company ad their level
of interest which influence the decision which is being made by the management.
Market is the place in which buyer and seller come together in order sell or purchase the
goods and services with the exchange of money. Marketing operations are being claimed t run
the overall marketing programme of the company also the yearly strategy planning a certain
methods. In relation to Bentley, they also allow for the delivery of values. Moreover, demand
and supply defined as the connection among the amount of goods which are manufacturer choose
to sell at different prices and the quantity which the buyer is having the desire to buy. Price is the
determinant which impact the demand and supply of given goods in the target market as it
directly impact the overall functioning of the business. These aspects impacts by the conditions,
technology in such the human capital operates with in the Bentley.
Equilibrium is the balance in the demand and supply or can say that when the amount of
goods is being demand by the buyer is equal to the total amount of supplied to their consumer by
which they can maintain the market equilibrium in context to Bentley.
Illustration 1: Supply and Demand. 2022
Market structure is defined as the operations, working and the overall consideration and
the type of rivalry fr business products which is known as the market structure. Perfect
competition, it is the type of market which is related to the freedom to enter and quit the market,

as the standard of industrial output and in the absence of any business with the major market
share. Monopolistic competition is the another market structure that is refereed to an industry in
which differentiated goods is being sold by them so that they can rightly ensures the better
working of the company(Baker, Kumar and Pandey, 2021). This is being seen that the graphic
which are leading to rising cost, there is the still more quality suppliers than the demand which
leads to results in minimising the selling prices of the seller. In consideration to Bentley,
equilibrium is reached when the quantity of products delivered is equal to the overall goods
supplied. As the prices are at a point of equilibrium as the quantity demanded is higher than the
quantity supplied.
The importance of strategic behaviour distinguishes oligopoly as the firm can change the
supply, quality, pricing and the promotions to acquire to have the benefit over its competitors in
various market system. Market operations is important for Bentley as it helps the company to
identify the long-term goals, offer the required monitoring to keep an organisation on track and
they ensures the effective investment returns.
CONCLUSION
It is summarised from the above essay that business economics helps in the development
of relationship in different aspects which are market structure, income and many more.
Furthermore, scarcity occurs in which the demand of goods is exceeding the supply in the given
market, limiting the certain options which are accessible to their customers in the economy as a
whole. Furthermore, market structure is vital for the company as it has a major influence on
market which results in influencing the opportunities, decisions and the motivation by the
participants in the market.

REFERENCES
Books and Journals
Baker, H.K., Kumar, S. and Pandey, N., 2021. Thirty years of Small Business Economics: A
bibliometric overview. Small Business Economics, 56(1), pp.487-517.
Trinugroho, I. and Lau, E. eds., 2019. Business Innovation and Development in Emerging
Economies: Proceedings of the 5th Sebelas Maret International Conference on
Business, Economics and Social Sciences (SMICBES 2018), July 17-19, 2018, Bali,
Indonesia. CRC Press.
Grégoire, D.A. and Cherchem, N., 2020. A structured literature review and suggestions for future
effectuation research. Small Business Economics, 54(3), pp.621-639.
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.
Devine, P.J., Lee, N., Jones, R.M. and Tyson, W.J., 2018. An introduction to industrial
economics. Routledge.
Nakara, W.A., Messeghem, K. and Ramaroson, A., 2021. Innovation and entrepreneurship in a
context of poverty: a multilevel approach. Small Business Economics, 56(4), pp.1601-
1617.
Chang, C.L., McAleer, M. and Wong, W.K., 2020. Risk and financial management of COVID-
19 in business, economics and finance. Journal of Risk and Financial
Management, 13(5), p.102.
Hauser, A., Eggers, F. and Güldenberg, S., 2020. Strategic decision-making in SMEs:
effectuation, causation, and the absence of strategy. Small Business Economics, 54(3),
pp.775-790.
Online
Supply and Demand. 2022. [Online]. Available through: <
https://www.intelligenteconomist.com/supply-and-demand/>