Normally, it is considered that business administration and the economic theories are of different concerns but it is wrong perception.For a successful business administrator not only the business laws but the concept of economics especially the managerial economics also matteres.
Whether the decision is about production and distribution, sale and purchase, goods and services, costs and prices,or profits and loses the owner must have the knowledge of basic economic theories.
For a profitable business not only the knowledge of economic theories is important but the manager must also be aware of the applicability of the theories to the real life. Basic managerial concepts are the managing tools in the business world.
For example if the government raises tax rate how u will manage the price of the commodity u are producing, if banks increases interest rates how much of your investment will cut down, if the no of your rivals increases how you will adjust your sale, if there are uncertainties what to do with your production level.The ansawers to all these questions could be achieved if you apply business study and managerial economics collectively.
Basic business decisions are made by the development of a microeconomic approach towards these decisions which may include very fundamental economic points like demand and supply concepts,elasticities concepts,market structures,game theory and public policy.
Accounting assessment is also judged by the economic activities and their resulting economic outcomes.Thus the managers have to make decisions regarding investments by using economic analysis strategy.
For business enterprises it is more technical and economic to analyze the business problems by the economic way.
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