What Is Business Economics?
Business economics is a field of applied economics that studies the financial, organizational, market-related, and environmental issues faced by corporations. Economic theory and quantitative methods form the basis of assessments on factors affecting corporations such as business organization, management, expansion, and strategy. Studies might include how and why corporations expand, the impact of entrepreneurs, the interactions among corporations, and the role of governments in regulation.
- Economic theory and quantitative methods form the basis of microeconomic assessments of factors affecting corporations.
- Business economics encompasses subjects such as the concept of scarcity, product factors, distribution, and consumption.
- Managerial economics is one important offshoot of business economics.
- The National Association for Business Economics (NABE) is the professional association for business economists in the United States.
Understanding Business Economics
Economics, broadly, refers to the study of the components and functions of a particular marketplace or economy, such as supply and demand, and the effect of the concept of scarcity. Within an economy, production factors, distribution methods, and consumption are important subjects of study. Business economics focuses on the elements and factors within business operations and how they relate to the economy as a whole.
The field of business economics addresses economic principles, strategies, standard business practices, the acquisition of necessary capital, profit generation, the efficiency of production, and overall management strategy. Business economics also includes the study of external economic factors and their influence on business decisions such as a change in industry regulation or a sudden price shift in raw materials.
Managerial economics is a sub-focus of business economics that focuses on the microeconomic factors pertinent to the decision-making process with an organization. Corporations make strategic decisions that result in a profit or loss. Managerial economic principles influence and guide corporate strategy and decisions.
Managerial economics apply to the public and private sectors and for-profit and not-for-profit organizations. All organizations must assess the internal and external economic climate to remain solvent because all organizations require a source of funding to continue operations. The goal of managerial economics is to use available resources and maximize production while minimizing waste.
Business Economics of Nonprofits
While nonprofits may focus on raising donations, for-profits instead focus on the sale of goods or services. Each organization strives to limit waste to maximize the overall usefulness of the available resources. Each type of organization uses the same principles to meet the associated goals of maintaining the necessary capital to continue working within the economy.
Both for-profit and nonprofit organizations perform similar business functions and require similar expertise. For example, all types of organizations engage in advertising, community, or customer support and need leadership to make appropriate strategic decisions.
Real-World Example of Business Economics
There are various organizations associated with the field of business economics. In the United States, the National Association for Business Economics (NABE) is the professional association for business economists. The organization's mission is "to provide leadership in the use and understanding of economics." In the United Kingdom, the equivalent organization is the Society of Business Economists.