Business Economics: Impact on Managerial Decisions and Market Dynamics

This essay provides an overview of business economics, highlighting its relevance to managerial roles and decision-making processes. It explores key concepts such as scarcity, choice, and opportunity cost, emphasizing their significance in economic systems. The analysis includes the use of the production possibility frontier to illustrate opportunity cost and a PEST analysis of Aston Martin to demonstrate the impact of the external environment on business decisions. The essay further examines market structures, including perfect competition and monopolistic competition, and their influence on pricing and market equilibrium. It concludes that business economics is crucial for understanding market dynamics and making informed business decisions.

Business Economics

Contents
Introduction................................................................................................................................3
Main Body..................................................................................................................................3
Conclusion .................................................................................................................................8
References..................................................................................................................................9

Introduction
The term business economics can be defined as the study of theories of economic,
reasoning, and methodology that are used to solve various business issues in the real world.
The essay will present about the business economics and its role for the managers and in the
process of decision making. Further, it will also present the concept related to scarcity, choice
and opportunity cost in the economics. In addition to this, the essay will also analyse the use
of production possibility frontier to show and instruct the significance of the idea of
Opportunity Cost in various economic systems.
Main Body
The term business economics is defined as an area of applied economics that evaluate the
issues related to financial, market related and environmental that businesses are to deal. There
are various concepts which are presented in the business economics such as the concept of
scarcity, product factors, distribution, and consumption (Nakara, Messeghem and Ramaroson,
2021). The main goal of the manager is to maintain the focus of the team towards the desired
target and 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 supports in giving proper advices to the management by
which the policies related to the monetary are formulated. Along with it, the managers are
able to do the economic analysis of the firms who are competing in the market. The term
scarcity is defined as the finite nature of resources and its availability as it indicates that
population have more wants than resources, which limits both individuals and society. The
phrase choice whereas, it can be defined as an people's decision to share resources with
others. Choice is said to be 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 conisdered as the study of businesses and its
factors 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 impact on the

decision-making company in relation to gain more consumers, experiencing tremendous
opportunities for expansion, increasing profitability, and so on.
The term 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 and the goals of various
segments that is 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).
The term possibility of production A frontier is explained as 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 the price or cost of the next best choice that a firm,
investor, or individual has. Opportunity cost provides proper guidance and direction in
relation to decision making to create as well as crucial to develop investment-based
judgments that are crucial to the idea in a firm like Aston Martin. Opportunity cost is said to
be important in many economic systems, for example the free market economy, since it
supports in the selection of feasible alternatives among all sorts of accessible possibilities. At
the same time, opportunity cost is essential in mixed economic systems because it guides
individual 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 a major influence on the decision-making and behaviour
of the company. 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 evaluate 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 the management that is managers and strategists where their market
is now and where it will be headed in the future. The following is a description of PEST
analysis in context to Aston Martin:
Political: In the United Kingdom, the political factors are handled and formulated by
the government interference in commercial challenges. General political stability and the
types of legislation enforced to adjust 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 are made by forces of demand and supply guide production, distribution, and
investment to customers. In the case of Aston Martin, one of the main economic factors
affecting company and organisational behaviour is unemployment, as low unemployment
rates make it difficult for the management 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, examining the social elements through people's
critical information is significant for making different business decisions. Aston Martin
currently has to cope along 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.
Various new technologies like search engine optimization, artificial intelligence, chatbots,
and other similar technologies, have an influence on firm and organizational behaviour by
generating new marketplace for business concern.
Alteration in the outer surroundings have a major influence on the business decisions and
company behaviour, according to the preceding argument. The state of the economy has a
major impact on the business concern decisions and its workplace activity at Aston Martin.
Decisions related to investment, the amount of individuals employed by the company, and the

degree of interest all influence the decisions made by the establishment's administration
(Chang, McAleer and Wong, 2020).
According to Barber (2021), the idea of market comprises of establishment, structure,
processes and societal relation in which parties enter for the goal of commerce (Barber,
2021). Marketing transactions are claimed to test a company's commerce program, as well as
annual scheme planning and campaign planning methods. The operations of the market
present as the anchor of marketing role, governance, and activity in a company like Aston
Martin, which provides for the delivery of values. In economics, demand and supply are
explained as the connection between the amount of goods that a manufacturer chooses to sale
at different cost and the measure 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 outlined as the scale of demand and supply elements.
Prices 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 way in which different sectors are outlined and distinguished founded on the
level and kind of competition for concern products is called as market structure. Along with
it, perfect competition which is refers to a large number of tiny enterprises competing against
each other, is one type of market structure. Perfect competition is explained by the freedom to
enter and leave the market, the standardisation of industrial output, and the absence of any
enterprise with an essential market share. Monopolistic Competition is some other 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 measure of
goods delivered is balanced to the quality of the goods delivered. When cost are at a point of
equilibrium, the measure demanded is greater than the measure supplied.

Monopolistic competition is defined by imperfect consumer collection, a big number
of firms, goods and prices, slightly various offerings, and profits. The value of strategic
behaviour distinguishes marketplace. Firms can alter supply, pricing, quality, and promotions
to get 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 rivalry
market structure, in which cost 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 the targets, offer the needed observation in order to keep the
establishment on its way in order to make sure strong returns. Restricted deals, measures for
stabilising government securities markets, a lack of a well-developed securities market,
complexness in executing, and contractions in open marketplace trading operations to the
bank rate are some of the market dealings constraints.
Conclusion
As per the given information in the above essay, it can be concluded that business
economics helps in the development of relationships among various economic aspects such
as market structure, income, and so on. Scarcity happens when the demand for a commodity
oversteps its supply in the marketplace, limiting the alternatives approachable to the clients
and hence the economy as a whole. The concept of opportunity cost is the expense of
foregoing a previously available opportunity and market structure is essential to the
corporation because it has an impact on the market results by influencing possibilities,
motivation, and decisions made by economic associates in the marketplace.

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.
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.
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.
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.
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.
Online
Supply and Demand. 2022. [Online]. Available through: <
https://www.intelligenteconomist.com/supply-and-demand/>