Assignment #1.docx
- 1. Assignment#1 Subject: Introduction To Business Teacher: Dr Sadia Khurram
- 2. Economics And Brief About History Of Economics: Economics: Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. Business Economics: Business economics is a field of applied economics that studies the financial, organizational, market-related, and environmental issues faced by corporations. Business economics assesses certain factors impacting corporation’s business organization, management, expansion, and strategy using economic theory and quantitative methods. Research topics in the field of business economics might include how and why corporations expand, the impact of entrepreneurs, interactions among corporations, and the role of governments in regulation. KEY TAKEAWAYS Business economics is a field of applied economics that studies the financial, organizational, market-related, and environmental issues faced by corporations. Business economics encompasses subjects such as the concept of scarcity, product factors, distribution, and consumption. Managerial economics is one important offshoot of business economics. 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
- 3. 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. Brief History of Economics: Economics is the science that studies how societies produce goods and services and how they consume them. Economic theory has influenced global finance at many important junctures throughout history and is an integral factor in our everyday lives. However, the assumptions that guide the study of economics have changed dramatically throughout history. Here we take just a brief look at the history of economic thought. Economics in the Ancient World: Economics in its basic form began during the Bronze Age (4000-2500 BCE) with written documents in four areas of the world: Sumer and Babylonia (3500-2500 BCE); the Indus River Valley Civilization (3300-1030 BCE), in what is today’s Afghanistan, Pakistan, and India; along the Yangtze River in China; and in Egypt’s Nile Valley, beginning around 3500 BCE. Societies in these areas developed notation systems using markings on clay tablets, papyrus, and other materials to account for crops, livestock, and land. These accounting systems, arising in tandem with written language, eventually included methods for tracking property transfers, recording debts and interest payments, calculating compound interest, and other economic tools still used today. From the third millennium BCE onward, Egyptian scribes recorded the collection of and redistribution of land and goods. Sumerian traders developed methods to calculate compound interest over a period of months and years. The Code of Hammurabi (circa 1810–1750 BCE), the earliest work of economic synthesis, specifies norms for economic activity and provides a detailed framework for commerce, including business ethics for merchants and tradespeople.
- 4. The first millennium BCE saw the emergence of more detailed written treatises on economic thought and practice. The Greek philosopher and poet Hesiod, writing in the eighth century BCE, laid out precepts for managing a farm in his Works and Days. Athenian military leader, philosopher, and historian Xenophon built on this in Oikonomikon, a treatise on the economic management of an estate. In Politics, Aristotle (circa 350 BCE) took these ideas further still, concluding that while private ownership of property was preferred, the accumulation of wealth for its own sake was “dishonorable.” The Father of Modern Economics: Today, Scottish thinker Adam Smith is widely credited with creating the field of modern economics. However, Smith was inspired by French writers publishing in the mid-18th century, who shared his hatred of mercantilism. In fact, the first methodical study of how economies work was undertaken by the French physiocrats, notably Quesnay and Mirabeau. Smith took many of their ideas and expanded them into a thesis about how economies should work, as opposed to how they do work. Smith believed that competition was self-regulating and governments should take no part in business through tariffs, taxes, or other means unless it was to protect free-market competition. Many economic theories today are, at least in part, a reaction to Smith's pivotal work in the field, namely his 1776 masterpiece The Wealth of Nations. In this treatise, Smith laid out several of the mechanisms of capitalist production, free markets, and value. Smith showed that individuals acting in their own self-interest could, as if guided by an "invisible hand," create social and economic stability and prosperity for all. Even devout followers of Smith’s ideas recognize that some of his theories were either flawed or have not aged well. Smith distinguishes between “productive labor,” such as manufacturing products that can be accumulated, and “unproductive labor,” such as tasks performed by a “menial servant,” the value of which “perish in the very instant of their performance.” One could argue that in today’s service-dominant economy, the excellent execution of services creates value by strengthening a brand through goodwill and in numerous other ways. His assertion that “equal quantities of labour, at all times and places, may be said to be of equal value to the labourer” ignores the psychological cost of working in hostile or exploitative environments. As an extension of this, Smith’s labor theory of value that the value of a good can be measured by the hours of labor needed to produce it has also largely been abandoned.