KTU B.TECH SECOND YEAR BUSINESS ECONOMICS [HS200] NOTE - MODULE 1 | IMPORTANT QUESTIONS


BUSINESS ECONOMICS [HS200] NOTE - MODULE 1

KTU B.TECH SECOND YEAR BUSINESS ECONOMICS [HS200] NOTE - MODULE 1,Business Economics Notes,Business Economics Questions,Business Economics important questions,Business Economics model questions,Business Economics second year notes,Business Economics second year questions,HS200 questions,HS200 notes

1. What is business economics and its role in managerial decision making ?

Ans)Business Economics, also called Managerial Economics, is the application of economic theory and methodology to business. Business involves decision making.

Decision making means the process of selecting one out of two or more alternative courses of action. The question of choice arises because the basic resources such as capital, land, labour and management are limited and can be employed in alternative uses. The decision-making function thus becomes one of making choice and taking decisions that will provide the most efficient means of attaining a desired end, say, profit maximation.


2. What is the scope of business economics ?

Ans)Demand Analysis and Forecasting:

A business firm is an economic organisation which transform productive resources into goods to be sold in the market. A major part of business decision making depends on accurate estimates of demand. A demand forecast can serve as a guide to management for maintaining and strengthening market position and enlarging profits. Demands analysis 
helps identify the various factors influencing the product demand and thus provide guidelines for manipulating demand.

Demand analysis and forecasting provided the essential
basis for business planning and occupies a strategic place in managerial economic. The main topics covered are: Demand Determinants, Demand Distinctions and Demand Forecastmg.

*Cost and Production Analysis:

A study of economic costs, combined with the data drawn from the firm’s accounting records, can yield significant cost estimates which are useful for management decisions. An element of cost uncertainty exists because all the factors determining costs are not known and controllable.

Discovering economic costs and the ability to measure them are the necessary steps for more effective profit planning, cost control and sound pricing practices.

Production analysis is narrower, in scope than cost analysis. Production analysis frequently proceeds in physical terms while cost analysis proceeds in monetary terms. The main topics covered under cost and production analysis are: Cost concepts and classification, Cost-output Relationships, Economics and Diseconomics of scale, Production function and Cost control.

*Pricing Decisions, Policies and Practices :

Pricing is an important area of business economic. In fact, price is the genesis of a firms revenue and as such its success largely depends on how correctly the pricing decisions are taken. The important aspects dealt with under pricing include. Price Determination in Various Market Forms, Pricing Method, Differential Pricing, Product-line Pricing and
Price Forecasting.

*Profit Management:

Business firms are generally organised for purpose of making profits and in the long run profits earned are taken as an important measure of the firms success. If knowledge about the future were perfect, profit analysis would have been a very easy task.

However, in a world of uncertainty, 
expectations are not always realized so that profit planning and measurement constitute a difficult area of business economic. The important aspects covered under this area are : Nature and Measurement of profit, Profit policies and Technique of Profit Planning like Break Even Analysis.

*Capital Management:

Among the various types business problems, the most complex and troublesome for the business manager are those relating to a firm’s capital investments. Relatively large sums are involved and the problems are so complex that their solution requires considerable time and labour.

Often the decision involving capital management are taken by the top management. BrieflyCapital management impliesplanning and control of capital expenditure. The main topics dealt with are: Cost of capital Rate of Return and Selection of Projects.

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