Real Estate Investments: As Safe as Houses?
Investors usually refer to an extremely safe investment with the phrase “As Safe as Houses”. This shows the traditional mentality that real estate is one of the safest investment options. The old school chain of thought believes that real estate investing is largely risk-free and provides the best hedge against inflation. However, the world has […]
Are Asian Economies headed for a Repeat of the 1997 Asian Financial Crisis?
Slowdown in China There has been a noticeable slowdown in the Chinese economy over the last few months. Coupled with a draining of the excess liquidity that was introduced into the economy through massive monetary stimulus in the wake of the global economic crisis, the Chinese economy suddenly looks vulnerable. Added to this is the […]
Impact of Political Stability on Businesses and Working Professionals
The Perils of Political Instability and Uncertainty If there is one thing that business leaders and entrepreneurs hate that is instability in the macro environment. Businesses operate according to forecasts and scenarios about the future that comprise surprises as well as certainties. However, as much as businesses factor in uncertainty, the one thing that wants […]
Quantitative Easing and Interest Rates
Quantitative Easing (QE) impacts almost every market in the globe. This is because it impacts certain fundamental economic factors which are interconnected across the world. One such factor is interest rates. The policy of Quantitative Easing (QE) is capable of significantly impacting interest rates in various ways. Since interest rates can literally change the market […]
Principles of Managerial Economics
Economic principles assist in rational reasoning and defined thinking. They develop logical ability and strength of a manager. Some important principles of managerial economics are: Marginal and Incremental Principle This principle states that a decision is said to be rational and sound if given the firm’s objective of profit maximization, it leads to increase in […]
For much of the 20th century, if you had wanted to study business management, you probably would have enrolled in a course in economics. This was because of the prevailing wisdom at that time that businesses are run according to economic concepts and hence, any aspiring manager would have to study economics as a means of actualizing their aspirations.
However, in the 1960s and 1970s, there was an emerging trend of offering business management programs by leading universities in the world as by then, the field of business management had spawned several sub disciplines like Marketing, HRM, Operations Management, and Finance.
Indeed, it can be said that these sub-disciplines grew out of the basic economics courses that we mentioned earlier. In the current context, many aspiring managers study economics as a compulsory course in the first year of their b-school education, managerial economics, and business economics in other basic courses.
Indeed, managerial economics and business economics are now taught in b-schools distinct from pure economics because the application of economics to business management is what these courses are all about. Whereas the basic economics course introduces the student to micro and macroeconomic concepts, managerial economics and business economics are geared towards equipping the student with the economic concepts necessary to run firms.
This module on business economics is organized around the four themes as described below:
Considering the fact that there is a separate module on managerial economics, this module deals with the economic issues faced by the firms at a macro level instead of the micro decisions that are taken by managers.
Further, given the fact that entrepreneurship is central to the setting up of new businesses, there is a need to discuss how entrepreneurs make economic decisions. The next aspect of business economics is how consumers make purchasing decisions.
Indeed, the motivations and the decision making process that underlies consumer behavior is an aspect that can be studied through the lens of economics.
The point here is that whereas marketing and other branches of management deal with these aspects according to behavioral and other theories, business economics focuses on how consumer behavior is influenced by economic aspects.
At the macro level, the firms must know how to survive and thrive in intense competition and hence the study of this decision making process helps us gain insights into how firms can earn more profits even during recessionary times.
As mentioned in the bulleted point list, the key decisions confronting the firm right from inception to operation to growth is themes that business economics can explore and which are useful for entrepreneurs and business leaders.
With increasing globalization, the fact that firms now operate in a global arena means that they must have the knowledge of how macroeconomic trends affect microeconomic decisions and hence, one of the topics that business economics studies is the interplay between international trade, exchange rates, and globalization.
As students of management, many of you would have intimate knowledge of these aspects. However, for many professionals well into their careers, sometimes they would need to be refreshed about these concepts. Hence, this module is designed in a manner that would help students engage with the concepts and for professionals to get a primer of these concepts.
Finally, the field of business economics owes a lot to the contributions of Alfred Marshall, Joseph Schumpeter, and Alfred Chandler. Hence, we would be covering their theories in detail in this module. With this brief overview, we welcome the readers to this module on business economics.
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