TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Affiliated to Institution of G.G.S.IP.U, Delhi

BUSINESS ECONOMICS

(102)

INTRODUCTION = MICRO ECONOMICSSarita chawlaAssistant professor

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

What is Business Economics

According to Spencer Singleman:” Business economics deals with integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management”. What is Business Economics all about

– Economics as a discipline provides a set of concepts and precepts.

– This furnish us the tools and techniques of analysis.

– Economic analysis is used as an aid to understand business practices and business environment.

– Such understanding facilitates business decision making.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Scope of Business Economics

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Time Value of Money=Discounting Principle

• One of the fundamental ideas in economics is that a Rupee tomorrow is worth less than a Rupee today. This is because of two reasons:

• To wait for future implies a sacrifice in the present

• The future is uncertain

• The interest rate – inflation

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Marginalise v/s Incrementalism

• Marginal Cost- It can be defined as the change in total cost as a result of producing one additional unit of a commodity.

• Incremental analysis stresses on total costs and total revenue resulting from changes in prices, products, processes, investments etc.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Difference between Micro & macro Economics

• In spite of very close relationship between two braches of economics, they differ from each other fundamentally.

• It is possible for an individual to become rich by finding bundles of rupee notes but no nation can become richer by printing notes.

• Savings may be virtue for an individual but if every body starts savings, there will be deficiency of aggregate demand.

• An individual can buy more of a commodity at a given price. But if many individuals try to buy more, the price will shoot up.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

RISK, RETURN & PROFITS

RISK, RETURN & PROFITS

RI

R

18 D

16 RII

14 C

12 C"

Rate of Return 10 B

7.5

8 A

6

4

2

0

3.5 6 9 Risk

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Opportunity Cost

Opportunity Cost is the income foregone which a businessman could expect from the second best alternative use of his resources.

In macro sense, the opportunity cost of more guns in an economy is less butter. Continued diversion of funds to defense spending amounts to a heavy tax on alternative spending on growth & development.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Market Forces and Equilibrium

• Equilibrium is the price at which demand and supply are equal to each other

• Determinants of Equilibrium:

(a) Demand

(b) Supply

(c) Equilibrium between demand and supply

• Market equilibrium is a zero excess demand and zero excess supply

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Thank You