Business economics is a field in applied economics which uses economic theory and quantitative methods to analyse business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with labour, capital and product markets. A professional focus of the journal Business Economics has been expressed as providing "practical information for people who apply economics in their jobs."
Business economics is an integral part of traditional economics and is an extension of economic concepts to the real business situations. It is an applied science in the sense of a tool of managerial decision-making and forward planning by management. In other words, business economics is concerned with the application of economic theory to business management. Business economics is based on microeconomics in two categories: positive and normative.
Business economics focuses on the economic issues and problems related to business organization, management, and strategy. Issues and problems include: an explanation of why corporate firms emerge and exist; why they expand: horizontally, vertically and spacially; the role of entrepreneurs and entrepreneurship; the significance of organizational structure; the relationship of firms with employees, providers of capital, customers, and government; and interactions between firms and the business environment. Business economics is actually the part of economics which can be simply regarded as the combination of economic theories and the relevant theories related to business management. Business economics is the study to focus on how economic theories will be affected the performance of business or business activities in practice. There are many practical case studies that have used the economic theories into the corporate development. For example, the product life cycle theory has discussed the entire product life cycle based on the economic perspective, which can be categorized by introduction, growth, maturity and decline. Apple Inc. is a multinational technological company that focuses on the electronic products' designs and development as well as software development. IPhone is the company's one of the competitive advantages that generate massive profit for the company. However, since smartphone product has moved to stages between maturity and decline, Apple Inc. has also considered the new product research development such as electric vehicles as the competitive environment in smartphone market becomes fierce and profit margin has declined. The example has well explained the scenario where economic theories do help to support the decision-making in the practical business organisation.
However, Andrei alludes to the fact that although economic theories could provide the theoretical perception to explain the business context, it could be still hard for managers to make an accurate business decision in the organisational management as the economic theories are built on some certain assumptions in the modelling environment, but in the practical business environment is much complex and hard to predict. The economic theory consideration does not mean the business decision will be always accurate. Hence, in the practical business environment, managers should not only consider the application of economic theories but also concern internal and external factors in the organisations before the decision making.
