Unit 55 Business Economics Assignment

Unit 55 Business Economics Assignment

There are several definitions of business economics provided by experts in the area. The majority of definitions fall into one of the following four categories:

understanding of riches

understanding of material wealth

understanding of the decision-making process, as well as understanding of growth and dynamic progression

Company economics encompasses the body of knowledge in economics that helps business managers make wise business decisions (Perman and Scouller, 1999). Such business economics theory helps managers evaluate the real-world challenges that beset commercial firms.

The practise of business operations is combined with economic ideas to create the theory of business theory. The goal of business economics is to give managers a readily available economic theory that they can use to their daily operations. It deals with the challenge of incorporating economic ideas and economic decision-making processes into business creation. In the business world, the word “business economics” is occasionally used interchangeably with the term “managerial economics,” both of which refer to the same field of economics.

“Business economics is a discipline that aids the business managerial teams in making company related decisions in order to accomplish the business goals and outcomes,” is a brief description of the word. In other words, business economics theories are concerned with how economic ideas are applied to company industry management. In their attempt to describe business economics, Spencer and Siegelman provided a more precise definition: “the integration of economic theory with business practise with the goal of easing managerial decision-making and forward planning.”

Task 1

P1.1 explain the economic problem of scarcity and resource allocation

The idea of scarcity in any business organisation refers to the understanding that the firm has a finite amount of resources at its disposal.

Business managers must choose the resources they want to use and the many processes they want to assign the resources to due to the idea of scarcity (Baye, 2000). This is the idea of choice in business economics.

The practise of choice and scarcity is the basic cause of the scarcity problem. The following is how business economics approaches the issue: What goods or services the company must provide

Which steps must be taken in order to provide these services?

Who should the required services or tangible goods be developed for?

Which goods and services should be created from those that are required?

It is ultimately up to the organisation to decide what services or goods to create because the resources that are available to it are scarce. The following are some additional frequent concerns in addition to the previously mentioned ones in the commercial context of scarcity and choice:

What process should be used to create the tangible goods and services?

What is the most efficient way to generate the required good or service?

Which type of production—labor allocation or a capital-intensive process—would be more advantageous?

Whom should physical things and services be produced for, and should everyone receive an equitable share of the items and services?

P1.2 explain how equilibrium in a market is achieved

Consumers of goods and services as well as service providers each have varied responses to changes in product prices. Price increases tend to decrease product demand while increasing producers’ incentives to manufacture more of the product; conversely, price decreases encourage consumers to purchase more of the product while discouraging producers from making more of it (Stackelberg et al., 2011).

According to the conceptual idea of business economics, there must be a price tag for a product in any free market situation to establish a balance between the supply of the product and the demand for it. The equilibrium price is known as this price.

The price at which all of a producer’s available inventory will be purchased by consumers, leaving nothing left to offer, is known as the equilibrium price for that specific commodity, also known as the price of market cleansing. This is the most effective way to achieve market equilibrium since neither a scarcity nor an amount of the product that was unsold remained on the market. The product’s market inventory is effectively and efficiently cleared at the equilibrium price. This fundamental aspect of the firm price system provides a huge number of benefits.

A market system is a methodical procedure that enables a variety of market participants to compete for different items and request that the demand be met. Any market system’s goal is to help the seller and the buyer throughout the negotiating process and ultimately during the formation of an agreement of some sort. The many market structures cover not only the process of price bargaining, but also that of deal regulation, credentials, reputation, and product clearance. In the end, the market system functions quite similarly to a social arrangement (Siegel, 1990).

P1.4 evaluate the role of opportunity costs in determining how economies make decisions

The core tenet of business economics is that all resources are scarce and have relatively finite quantities. Therefore, it is crucial to allocate the various resources appropriately in order to make the most use of them. Business organisations are compelled to allocate resources based on facts when the connotation of scarcity is present. If a resource is used on one product, it won’t be accessible for the subsequent products (Silvia, 2011).

The resource costs associated with impulsive opportunities are represented by opportunity costs. The majority of organisations adhere to this idea, and a decent number of resources are set aside in case an opportunity presents itself in front of the organisational structure. The economics of the firm benefit greatly from this flexibility. For instance, a corporation is working on two projects at once, and both are using the same resources. The company has already divided up all of its resources equally between the two items. The corporation won’t be able to profit from the success of any one product in such a scenario if the other product fails on the market since all the resources have already been consumed and no opportunity cost was conserved.

P1.5 evaluates how important elasticity is to market interactions.

The elasticity factor, according to the theory of business economics, measures how sensitive an economic variable is to changes in other related variables. These inquiries about business decisions are addressed by the elasticity idea of economy:

“How many more sales would be made if the price of a certain product was reduced?”

“Will increasing the price of one product from one manufacturer have an effect on sales of other items from the same firm, and if so, how?”

A product variable that is elastic (has an elasticity value greater than 1) is one that is affected more proportionally by changes in other economic factors. In contrast, any economic variable with an elasticity value less than one is referred to as an inelastic variable and is affected by changes in other economic variables in a manner that is less than proportionate (Haque, 2005). At various starting positions, the elasticity of a given variable might vary. One of the most crucial elements in the neo-traditional business economics principles is the idea of flexibility in the company organisation.

Task 2

P2.1 explain the implications of pricing and objectives on a business firm’s operations

The goal of every commercial company organisation is to generate profit via the selling of its goods and services. The corporation relies on business economics principles and incorporates these theories in its business decision-making process in order to attain financial success. The goals of an organisation and the cost of the product it sells have a significant impact on how that organisation conducts its business (Vives, 1999).

A company’s price decisions are made in accordance with the goals it has established.

A market structure known as a monopolistic completion has imperfect competition for the producers, such as when many organisations offer items that fall into the same category but have differing characteristics from one another. (for instance, clothing with varied logos), and as a result, one company cannot completely replace the goods made by other companies. In such a market structure, one company sets its prices based on the prices provided by other companies, ignoring the impact of its own pricing on other companies’ pricing decision-making (Scherer, 1970).

An oligopoly is a type of market structure in which a small number of companies band together and control the bulk of the market. This makes it possible for the dominant group to set product pricing.

Monopsony: In this type of market structure, there is only one consumer for a certain class of goods. In this type of market system, the customer has a significant impact on the pricing process.

Oligopsony: In this type of market structure, there are several suppliers of a certain good but only a small number of consumers. In this type of market, buyers have a strong effect.

Monopoly market: In this type of market structure, the product is exclusively provided by one particular supplier. The solitary producer determines prices in this market arrangement (Kamien and Schwartz, 1982).

Unit 55 Business Economics Assignment

There is no barrier for organisations to enter the market under perfect competition, which is a hypothetical market structure. Since there are an endless number of consumers and sellers, the pricing of the commodity in every way follows the demand curve.

P2.3: How a company’s activities and market structure impact its behaviour

Market structure and other aspects of the company’s operations have a significant impact on how decisions are made within the business (Mehallis, 1981). The most important element influencing a firm’s behaviour is market structure.

For instance, if a corporation is manufacturing a certain product under a pure monopoly, the company may manage its resources based on the knowledge that price can be set in accordance with its preferences and that customers have no other options for its goods and services.

P.2 4 cite a few UK legislation and assess how they affect BT’s market strength.

The Office of Communications is in charge of managing the regulations that the government imposes on the UK telecom industry. In the UK, the Office of Communications is the only institution with power for laws pertaining to communications. The Enterprise Act and Competition Act of 1998’s definitions of market structure and competition are included in the laws for the telecom industry.

Unit 55 Business Economics Assignment

Task 3

P3.1 analyse how the structure of UK economy has changed in the 21st Century giving the arguments for the following factors of change

The UK’s economy and market structure have seen substantial change over the past several decades as a result of the growing trend of privatisation, the transition of businesses from the industrialised to the service sector, and now the emergence of technology-based businesses. The majority of UK industries are currently run by private companies. The market structure has been significantly altered by the development of technology and the internet. Small businesses may now compete with major corporations by being present in the online market. The development of the digital economy is altering the way businesses used to operate, and as a result, businesses with an online presence are now mainly shaping the structure of the UK.

P3.2 assess the resources available to address issues with macroeconomic policy

The goals of UK economic policies are to be realised in the market structure, which is what the UK government’s macroeconomic policy aims to achieve. The goals are to be attained using a variety of tools and devices. For instance, the UK government could want to set a goal to reduce price inflation. The following are the main instruments at the government’s disposal to address the difficulties of macroeconomic policy:

Unit 55 Business Economics Assignment

Monetary policy: The government can achieve its macroeconomic policy goals by implementing monetary policies. These instruments include shifting interest rates, changing the money supply, and changing exchange rates.

Numerous supply-side policies have been created in an effort to increase market efficiency.

Fiscal policy: This strategy entails modifying taxation as well as trends in government spending and borrowing.

Task 4

P4.1 demonstrate the theory of comparative advantage using relevant illustrations from emerging economies such as BRIC or MIST

The aggregate economic powers of Brazil, Russia, India, and China are referred to as the BRIC economy. On a worldwide level, these nations are all now experiencing a comparable economic progress. Despite having various economic policies and organisational styles, all of these nations have a major impact on the global economy at around the same level. Due to the added strength it derives from the collective economic structure of all EU members, the UK economy enjoys a major edge over the economies that make up the BRIC group. The EU economy, which is the biggest economy in the world, uses the UK as a basis.

Unit 55 Business Economics Assignment


Today’s corporate organisations extensively use the principles of business economics. Such ideas have an impact on a variety of commercial activities, including pricing products and services, comprehending the current market structure, tracking the supply and demand curve, improving decision-making, and learning about the elasticity of the economic market. The business managers must comprehend these business economic ideas in order to optimise the firm’s business operations, adopt a more accurate decision-making process that affects the price of the products produced by the company, and decide what products need to be created. These ideas also help managers create resource allocation strategies with appropriate strategy.


Baye, M. (2000). Managerial economics & business strategy. Boston: Irwin/McGraw-Hill.

Btplc.com, (2005). Regulation in the UK. [Online] Available at: http://www.btplc.com/Thegroup/RegulatoryandPublicaffairs/RegulationsintheUK/index.htm [Accessed 4 May 2015].

Edge, K. (2010). Free trade and protection: advantages and disadvantages of free trade. [Online] Hsc.csu.edu.au. Available at: http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html [Accessed 4 May 2015].

Haque, M. (2005). Income elasticity and economic development. Dordrecht: Springer.

Hopkins, K. (2008). Signs of recession: the impact on Britain’s real economy. The Guardian. [Online] Available at: http://www.theguardian.com/business/2008/oct/13/economics-creditcrunch [Accessed 4 May 2015]