Business economics
From Economypedia.com
Business economics is economics in a corporate environment. It is a type of economics that implements microeconomics analysis to specific decisions in business. Business itself is entrepreneurial behavior under risk. The subject spans elements of both economics and economic theory. Business economics or managerial economics absorb mathematical techniques like Lagrangian calculus, correlation and regression analysis. Business economics aims to reconcile and optimize decisions undertaken for business purposes in view of constraints that are imposed by scarceness.
Business economics is generally applied to certain areas of economics. Mathematical techniques of the subject are utilized for pricing analysis, capital budgeting, risk analysis, and production analysis. Pricing analysis are methodologies employed to examine a number of pricing decisions like price discrimination and transfer pricing. Capital budgeting is used to analyze a company's purchase related decisions. Risk analysis is applied to appraise the risk associated with a business decision. Production analysis is used to examine optimum factor application, economies of scale and production efficiency. [1]
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[edit] Production efficiency
Production efficiency denotes an economic point where any economy cannot produce increasing amounts of a material without decreasing the output of another product. This scenario usually occurs at the time when an economy is engaged in the maximum production capacity possible in a given set of circumstances. A greater production efficiency is required given the limited scope of available resources.
[edit] Price discrimination
Price discrimination is a business strategy where dissimilar prices are charged from different customers for identical product or service. In an ideal price discrimination strategy, seller of a product will extract the maximum price of a product that the customer is willing to pay. Examples of price discrimination include multiplexes projecting films. Ticket prices vary from one show timing to another show timing. Price discrimination is advantageous for companies as it enables the business to make the maximum possible profit from each customer. [2]
[edit] Transfer price
Transfer price is the price at which different divisions of same company does commercial transactions with each other. The list of transactions includes supply of labor and supplies among departments. Transfer pricing is done when divisions of a large company are addressed as individually run units.
[edit] See also
[edit] References
1. Businesseconomics entry on business economics. Retrieved on September 05, 2008.
2. Investopedia entry on price discrimination. Retrieved on September 05, 2008.
[edit] Further reading
- Article in Bized.co.uk
