Business Economics: Analyzing Scarcity, Choice, and Opportunity Cost

This essay delves into the realm of business economics, elucidating the pivotal role of economic theories and methodologies in addressing real-world business challenges. It highlights the significance of economics for managers, particularly in decision-making processes, and explores core concepts such as scarcity, choice, and opportunity cost. The essay further demonstrates the application of the production possibility frontier to illustrate the importance of opportunity cost within diverse economic systems. It also discusses the external factors impacting business decisions using PEST analysis with Aston Martin as example. Finally, it examines market structures and their influence on business operations, emphasizing the interplay between demand, supply, and equilibrium pricing in various competitive environments.

Business Economics

Contents
Introduction................................................................................................................................3
Main Body..................................................................................................................................3
Conclusion..................................................................................................................................6
References..................................................................................................................................7

Introduction
Business Economics can be defined as the study of economic theories, reasoning, and
methodology that are used to solve business challenges in the real world. The essay will
outline about the business economics and the role of economic for the managers and in the
process of decision making. Further it will also demonstrate the concept of scarcity, choice
and opportunity cost in the economics. The essay will also present the use of production
possibility frontier to show and enlighten the significance of the idea of Opportunity Cost in
various economic systems.
Main Body
Business economics is an area of applied economics that evaluate the financial, market
related and environmental issues that businesses face. There are various concepts which are
covered in the business economics such as the concept of scarcity, product factors,
distribution, and consumption (Nakara, Messeghem and Ramaroson, 2021). As a manager,
the main goal of the manager is to maintain the focus of the team towards the goal and that
they should have various set of abilities and that are linked with economics along with
leadership and management talents. To the managers economics play an important role
because due to it the mangers are able to research about the macroeconomics patterns and are
able to monitor the constant changes in the economic environment (Stage, 2018). In planning
of any business, it is used and
it also helps in giving trade advice to the management by which the monetary policies are
also formulated. Along with it, the managers are able to do the economic analysis of the
competing firms of the market. The phrase scarcity refers to the finite nature of resources as
well as their availability. It indicates that people have more wants than resources, which
limits both individuals and society. The phrase choice, on the other hand, can be defined as
an individual's decision to share resources with others. Choice is the action of selecting from
a variety of possibilities or one of the options available to a person. For a corporation like
Aston Martin, choice refers to the ability of the producer or customer to choose which
product or resource to buy or offer from a variety of possibilities. Business economics is the
study of businesses and the variables that lead to the diversity of corporate structures and
relationships with capital, labour, and product markets using economic tools and theoretical
ideas (Grégoire and Cherchem, 2020). The phrase is used in a variety of ways, such as
management economics, business economics, industrial organisation, and so on. Changes in

the economy have an influence on a company's decision-making in terms of gaining more
consumers, experiencing tremendous opportunities for expansion, increasing profitability,
and so on.
Business economics as a discipline aid in strategic thinking and logical decision-
making in order to maximise results. It is directly associated to the decision-making process
that it creates and assists an individual in studying all elements that affect functioning,
management, and the success of a company. On the other side, economics is all about the
production, distribution, and consumption of goods and services. An individual may use this
to research how people, governments, organisations, and nations make resource allocation
decisions. In economics, scarcity refers to the disparity between the availability of restricted
resources and the theoretical requirements or preferences of the population for such
resources. As a result, business concerns are compelled to make judgments on how best to
distribute resources efficiently for serving the majority of needs, as well as the goals of
customers, government, and industry. In relation to Aston Martin, scarcity has the potential to
limit customer options, which in turn affects the entire economy (Hauser, Eggers and
Güldenberg, 2020).
Possibility of Production A frontier is a concept in economics that states that factors
of production are scarce. To put it another way, it's a visual depiction as well as an economic
model of an ideal production balance between two items with finite resources. Similarly,
opportunity cost is defined as the price or cost of the next best choice that a firm, investor, or
individual has. Opportunity cost gives clear guidance and direction regarding decision
making to create as well as crucial to develop investment-based judgments that are important
to the idea in a firm like Aston Martin. Opportunity cost is important in many economic
systems, such as the free market economy, since it aids in the selection of feasible
alternatives among all sorts of accessible possibilities. At the same time, opportunity cost is
significant in mixed economic systems because it guides people and businesses to use each
available resource efficiently and artfully in order to maximise economic earnings (Devine
and et. al., 2018).
The term business external environment refers to the sum total of all external
influences and components that have an impact on a company's decision-making and
behaviour. It is critical for organisational managers to comprehend how changes in the
external environment, as well as its factors, affect the corporation. PEST Analysis is used in
the context of Aston Martin to examine how changes in the external business environment
impact organisational decision-making and behaviour. It's a strategy framework that's

employed in the managing strategies' environment scanning section (Baker, Kumar and
Pandey, 2021). The external environment of a business is significant in terms of PEST
Analysis because it tells managers and strategists where their market is now and where it is
headed in the future. The following is a description of PEST analysis in relation to Aston
Martin:
Political: In the United Kingdom, the political climate is handled and formed by the
level of government interference in commercial issues. General political stability and the
types of legislation implemented to regulate firms have a negative influence on Aston
Martin's decision-making and organisational behaviour.
Economic: In the United Kingdom, the economy is market-oriented, which means that
price signals created by forces of demand and supply guide production, distribution, and
investment to consumers. In the case of Aston Martin, one of the economic factors
influencing firm and organisational behaviour is unemployment, as low unemployment rates
make it difficult for managers to make hiring decisions. Tax rates are another economic issue
that impacts firm decision-making and behaviour. Increases in tax rates in the United
Kingdom mean that employees are compelled to pay more tax on their earnings, which means
that consumers have less money to spend on establishment offerings. In the case of Aston
Martin, it has a negative influence on firm decisions and organisational behaviour since it
expects to earn less sales, lowering its investment level. The rate of inflation is another
economic issue that influences business and organisational decisions. It has been discovered
that the rate of inflation has an impact on worker decisions since it limits the possibility for
spending as well as saving.
Social: In the United Kingdom, analysing social components through people's vital
data is critical for making different business decisions. Aston Martin currently has to cope
with the varying demands, interests, and choices of several generations, all of which
necessitates different approaches to the company's many offers.
Technical: The technological environment in the United Kingdom is rapidly
increasing. Technological advancements provide chances and benefits inside Aston Martin.
New technologies, such as artificial intelligence, search engine optimization, chatbots, and
other similar technologies, for example, have an influence on corporate and organisational
behaviour by generating new markets for businesses.
Changes in the external environment have an impact on business decisions and company
behaviour, according to the preceding argument. The state of the economy has an impact on
business decisions and workplace behaviour at Aston Martin. Investment decisions, the

amount of individuals employed by the firm, and the degree of interest all influence the
decisions made by the establishment's management (Chang, McAleer and Wong, 2020).
The idea of market, according to Barber (2021), is made up of institutions,
infrastructures, processes, procedures, and social connections in which parties participate for
the goal of trade (Barber, 2021). Marketing operations are claimed to run a company's
marketing programme, as well as yearly strategy planning and campaign planning methods.
Market and its operations serve as the backbone of marketing function, governance, and
support in a firm like Aston Martin, which allows for the delivery of values. In economics,
demand and supply refers to the connection between the amount of goods that a manufacturer
chooses to sell at various prices and the quantity that buyers desire to buy. A company's
fundamental model for determining pricing is demand and supply, which is based on
economic theory. Demand and supply are regarded fundamental drivers in market
transactions between sellers and buyers for defining pricing and quantities on the market,
which are in turn affected by conditions and technology in which human capital operates
inside Aston Martin.
In a business, equilibrium pricing is defined as the balance of demand and supply
components. Prices are likely to revert to equilibrium in the case of Aston Martin unless
specific supply or demand characteristics alter (Trinugroho and Lau, 2019).

Figure 1 Supply and Demand. 2022
(Source: Supply and Demand. 2022)
The manner in which various sectors are defined and differentiated based on the
degree and kind of rivalry for business products is known as market structure. Perfect
competition, which refers to a large number of tiny enterprises competing against each other,
is one type of market structure. Perfect competition is defined by the freedom to enter and
quit the market, the standardisation of industrial output, and the absence of any enterprise
with a significant market share. Monopolistic Competition is another market structure, which
is defined as an industry in which a large number of enterprises sell items that are identical
replacements. It can be seen from the graphic that at rising cost, there are still more quality
supplies than demand, resulting in lower selling prices for the seller (Supply and Demand,
2021). In the case of Aston Martin, equilibrium is reached when the quantity of goods
delivered is equal to the quality of the goods delivered. When prices are at a point of
equilibrium, the quantity demanded is greater than the quantity supplied.

Monopolistic competition is characterised by imperfect customer information, a large
number of firms, goods and prices, somewhat different offerings, and profits. The importance
of strategic behaviour distinguishes oligopoly. Firms can modify supply, pricing, quality, and
promotions to acquire an advantage over competitors in such a market system. Monopoly is a
market system in which prices are set based on the number of customers or providers in the
market. Managers at Aston Martin, for example, engage in business activities with a perfect
competition market structure, in which prices are often lower and are based on demand
elasticity and the increase of returns to scale. In a perfect market, there are an abundant
number of buyers and sellers, and prices reflect demand as well as supply.
Market operations are vital in a firm like Aston Martin because they help the
organisation identify long-term goals, offer the required monitoring to keep the company on
track, and ensure strong investment returns. Restricted deals, measures for stabilising
government securities markets, a lack of a well-developed securities market, complexity in
execution, and contractions in open market operations to the bank rate are some of the market
operations' constraints.
Conclusion
Based on the above essay, it can be said that business economics aids in the
development of relationships among various economic aspects such as market structure,
income, and so on. Scarcity occurs when the demand for a product exceeds its supply in the
market, limiting the options accessible to customers and hence the economy as a whole. The
concept of opportunity cost refers to the expense of foregoing a previously available
opportunity. Market structure is important to a corporation because it has an influence on
market results by influencing opportunities, motivation, and decisions made by economic
participants in a market.

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.
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.
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.
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.
Devine, P.J., Lee, N., Jones, R.M. and Tyson, W.J., 2018. An introduction to industrial
economics. Routledge.
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.
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.
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.
Stage, S., 2018. 1. Ellen Richards and the Social Significance of the Home Economics
Movement. In Rethinking home economics (pp. 17-33). Cornell University Press.
Online
Supply and Demand. 2022. [Online]. Available through: <
https://www.intelligenteconomist.com/supply-and-demand/>