Economics is a theory about concepts such as demand, supply, cost, price etc. When we integrate such concepts about economics with business practice it is known as Business Economics or Managerial Economics. The aim is to use these economic tools to aid in the decision-making process of a business.
Meaning of Business Economics
To understand the meaning of business economics we can think of Business Economics as the integration of two major concepts: Economic Theory + Business Practices.It helps in making the best decision based on the analytical tools of Economic Theory and best-suited Business Policies defined within Business Practices.
As the name suggests a mixed economy is the golden combination of a command economy and a market economy. So it follows central economic planning and oversight.
The means of production are held by both private companies and public or State ownership. And while market forces decide the price, demand, supply, etc there is some gov oversight to prevent monopolization and discrimination
The idea behind a Mixed Economy is to tackle the demerits of both a capitalist economy and a socialist economy and come up with a unique system. It appreciates the concept and the freedom of private ownership of properties and resources
But at the same time, it understands the disadvantage of unchecked capitalism. Hence it proposes government oversight and economic planning so there is no discrimination against the poorest citizens.
Features of Mixed Economy
- Coexistence of All Sectors: In a mixed economy all three sectors coexist in harmony, i.e. private sector, public sector, and joint sector. The joint sector is jointly run by the government and private companies, with at least 51% ownership belonging to the state.
- Cooperative Sector: In a mixed economy another sector exists, the cooperative sector. The main aim of the formation of this sector is so that the government can provide financial assistance to cooperative societies involved in warehousing, agricultural, dairy industry, etc.
- Freedom and Control: Here all individuals have the freedom to produce goods and products, hold property, choose their occupation and choose or demand products/services they want. But to keep a check on monopolistic practices and discrimination of the lower sectors of society the state maintains some control.
- Economic Planning: In a mixed economy we have a central planning authority. All sectors of the economy follow the economic plan of the state to achieve various targets and goals. The plan is not rigid but more of a general guideline for economic growth and prosperity of the nation.
- Social Welfare: One of the main aims of a mixed economy is social welfare. It aims to reduce the wealth gap in the country and fight the inequalities of our society. The aim is to reduce poverty and unemployment. And at the same time also improve social security, public health care, public education system, etc.
Merits of a Mixed Economy
- Freedom the citizens enjoy. Especially the economic freedom to ownership of property and choice of goods and services.
- Ownership and existence of private producers also increase capital formation in the country. There is an incentive to do better and innovate as well.
- Price mechanism prevails. So the allocation of resources is more scientific and beneficial to the economy.
- Also enjoys the advantages of central economic planning. This will help the economy grow rapidly and in the correct direction.
- There is healthy competition in the market. There is no cut-throat competition and adverse tactics due to government oversight. Also, there is no absolute lack of competition which is disadvantageous,
Nature of Business Economics
It Incorporates Elements of Macro Analysis
Even though all businesses focus on their profitability and survival, a firm cannot operate in a vacuum. The external environment of the economy like income and employment levels in the economy, tax, policies, etc., affects the firm. All these external factors are components of Macroeconomy.
Business Economics is a Science
What is Science? It is simply a systematic body of knowledge which can establish a relationship between cause and effect. Further, Mathematics, Statistics, and Econometrics are decision sciences.
Business Economics integrates these decision sciences with Economic Theory to arrive at strategies to help businesses achieve their goals. Hence, it follows scientific methods and also tests the validity of the results. This is one aspect of the nature of business economics.
It is an Art
Business Economics is an art as it requires the practical application of rules and principle to achieve set objectives.
It is Based on Micro Economics
We understand the basic difference between micro and macroeconomics. A bussines manager is certainly more concerned about achieving the objectives of his own organization. After all, this helps him in ensuring profits and long-term survival of the firm.
Business Economics is more concerned with the decision-making situations of individual establishments. Therefore, it depends on the techniques of Microeconomics.