Nature and Scope of Business Economics

Introduction

Origin: Derived from the word 'Oikonomia' (meaning household)
Term Evolution: Known as Political Economy until the 19th century
Father of Economics: Adam Smith
- Wrote 'Wealth of Nations' (1776)
Narrow Definition: Human wants are unlimited but resources are limited
Modern View: Definition too narrow, real-world problems are more complex
Purpose of Study: Economics doesn’t solve all problems but provides a perspective

Decision Making: In business, decisions need to be sound and informed
Applied Economics: Integrating economic theories and techniques into business decisions
Nature:
- Science: Studies cause and effect relationships
- Art: Different applications by different people
- Microeconomics: Primarily concerned with individual units
- Macroeconomics Elements: Include some broader economic factors
- Market Theory: Application in business
- Pragmatic: Practical application
- Interdisciplinary: Involves various disciplines
- Normative: Suggests what should be, rather than what is

Size: Economics is broader; Business Economics is a subset
Principles: Economics frames principles; Business Economics applies them
Focus: Microeconomic character in Business Economics
Main Task: Fulfilling specific business needs
Nature:
- Economics: Both positive and normative
- Business Economics: Primarily normative
Scope:
- Economics: Wider
- Business Economics: Narrower