The Problems with the GDP System and Requirements from the New Metric
In the previous articles, we have discussed the various pitfalls of the GDP system. We have also made the case for an urgent need for a serious and complete overhaul of the GDP system i.e. GDP must be replaced by another metric. However, we have not explained what this other metric should be like. In […]
Top Five Factors That Spur Economic Growth
The world has witnesses the rise and fall of many great economic empires. It is safe to say that we have enough empirical data that we can analyze what spurs economic growth. In this article, we will look at some of the important factors that lead to economic growth. Natural Resources Natural resources are the […]
Economics of Human Resources Management: Hiring, Firing, and Reward Systems
The Changing Emphasis of HR Decisions Despite the widespread impression that Human Resources is distinct from the other profit generating and economic functions such as Production, Sales, Marketing, and Core Competency driven work, the HR function is indeed driven as much by concerns over hiring and retaining the best talent as well as empowering and […]
How Savings Affect the Economy?
Economics is divided on the role of savings. Many economists believe that saving is a personal virtue but social vice. This is because if all the people start saving, the expenditure will go down. Since the current system measures GDP and economic growth based on expenditure, a higher savings rate makes it appear like the […]
China’s Modern Day Ghost Cities
The GDP system has found several criticisms. However, none of the criticisms have been as apparent as an unusual phenomenon called “ghost cities” and “ghost towns” which have cropped up all across China. The sheer wastage and diversion of resources to non productive purposes to meet the government’s targets for GDP growth is apparent 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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