Business Economics

What Is Business Economics?

Business economics is a field of applied economics that studies the financial, organizational, market-related, and environmental issues faced by corporations.

Understanding Business Economics

In the broadest sense, economics refers to the study of the components and functions of a particular marketplace or economy — such as supply and demand — and the impact of the concept of scarcity. Within economics, production factors, distribution methods, and consumption are important subjects of study. Business economics focuses on the elements and factors within business operations and how they relate to the economy as a whole.

The field of business economics addresses economic principles, strategies, standard business practices, the acquisition of necessary capital, profit generation, the efficiency of production, and overall management strategy. Business economics also includes the study of external economic factors and their influence on business decisions such as a change in industry regulation or a sudden price shift in raw materials.

Types of Business Economics

Managerial Economics

Managerial economics is a field of study within business economics that focuses on the microeconomic factors that influence the decision-making processes with an organization. The strategic decisions of corporations result in either a profit or a loss for the company. Managerial economic principles are intended to influence and guide corporate strategy and decisions toward the best outcomes for a company.

The study of managerial economics is applied to both the public and private sectors, as well as to for-profit and not-for-profit organizations. All of these types of organizations must effectively assess the economic climate in order to remain solvent (because all organizations require a source of funding to continue operations). Across all sectors of the business world, the main goal of managerial economics is to use all available resources within an organization, specifically maximizing production while at the same time minimizing any waste.

Business Economics for Nonprofit Organizations

While nonprofit organizations and for-profit organizations may have different goals, both of these types of organizations perform similar business functions and require similar expertise. In addition, they must also strive to limit waste and maximize the overall usefulness of their available resources in order to maintain their viability as enterprises.

Both nonprofit organizations and for-profit organizations have to maintain the necessary capital to continue working within the economy; this requires them to use many of the same principles. For example, all types of organizations engage in advertising, community, or customer support and need leadership to make appropriate strategic decisions.

Special Considerations

There are various organizations associated with the field of business economics. In the U.S., the National Association for Business Economics (NABE) is the professional association for business economists. NABE is the largest international association of applied economists, strategists, academics, and policy-makers committed to the application of economics; the mission of the organization is "to provide leadership in the use and understanding of economics."

In the United Kingdom, the equivalent organization is the Society of Business Economists (SPE). SPE is the leading organization serving professional economists in the U.K. and Europe.