Business Economics Financial Crises and Recession

Question: 1. Demonstration of a clear understanding the issues. Use of academic models. Clear focussed understanding of a topic 2. Critical analysis is an important test of the students ability to evaluate business economics concepts. 3. Introductions and conclusions should briefly address the issues to be discussed and discussed respectively. Answer: Introduction Business Economics is also known as Managerial Economics. It is the relevance of economic theory and methodology. Business entails decision-making. Decision-making is the process where one has selected from two or more than two alternatives of action. Due to the limitation of fundamental resources such as land, labour, capital and management, the question of choice arise. (Allen, 1999) Those resources can also utilise in alternative uses. The decision-making is a process where one should make a choice and take decisions, which will give the most efficient decision for maximising the profit level. The consideration of the chief executive has needed in different features of the business. The chief executive has to choose a single option from between the many options that influence the interest of the firm to reach the most favourable decision, which can encourage the business to achieve the goal of the organisation. Business Economics or Managerial Economics assembles those necessities of the business firms. Main Body Macro Economics Issues in Business Economics The word macro' means large or significant. Macro Economics is significant subject deals with the total economy. Business ignores common issues such as unemployment, inflation and economic output or interest rates, which emerging as a significant threat in future. The recent Macroeconomic conditions determine whether the development or growth of the organisation is a good idea right now or not. Macroeconomics determine the process that how the entire economy functioned and implemented (Business pricing and inflation, 1984). Usually, it works on the whole organisation rather than focusing on an individual. The main Macro Economic factors that should consider before expanding a business are as follows- Unemployment Rate The level of unemployment is the proportion of people in the labour force that are without a job and vigorously searching for work. This high incidence of unemployment is not enough for business expansion. However, high rate of unemployment means a large number of workers with lower wages that consider the improvement of profit margins but due to high unemployment, the demand for goods and services have decreased and hampers the economic growth and business expansion. Inflation Inflation is the process to determine the increase rate of price in an economy. High inflation rate means that the costs of goods and services also increase. If the rate of price is too high, then people sometimes decide to change their decisions about purchasing the products. Economic Output Economic output is the process to determine the rate of growth or decline of the organizations economy. The Gross Domestic Product (GDP) measures an Economic Output. The Gross Domestic Product (GDP) is the cumulative cost of the products or goods along with services that are manufactured during a particular period in a business economy. If the economic output rate is increased, that means people are employed and the company is investing. If the economy of the business decreases then, unemployment gets increase and the business also investing decline. Micro Economic Issues in Business Economy Micro Economics is the subject that deals with picky markets and divisions of the economy (Kevane, 2001). The main Micro Economic factors that should consider before expanding a business are as follows- Consumer behaviour Individual employment markets The theory of the organization Micro Economics is concerned with- Demand along with supply within particular marketplace Individual customer behaviour e.g. customer selection theory Individual employment markets e.g. wage determination, labour demand, etc. From production and consumption externalities are arise (Richardson, 2015). Sifting from Micro to Macro Microeconomic analysis See the diagram of plain supply along with demand for Automobiles. Micro Economics is apprehensive with the problems like the collision of demand increasing meant for automobiles. The aforementioned microeconomic investigation illustrates that the increasing demands lead to elevated price along with elevated quantity (Weskott, 2014). Macroeconomic investigation See the diagram it determines the goods and services produced in the economy. This macroeconomic analysis shows the real GDP (Gross Domestic Product) instead of quantity. Instead of goods price it shows the entire PL (price level) for the economy (Razzu and Singleton, 2016). The diagram of Macro Economic Analysis and Micro Economic Analysis are based on the same principles. It just shows the Real GDP (Gross Domestic Product) pretty than Quantity along with Inflation and PL (Price Level). Differentiation between Micro Economics and Macro Economics The differences between the micro economics and macro economics are as follows- Microeconomics looks at small segments of the economy whereas macroeconomics looks at the whole economy. Symmetry Asymmetry Economic study deduces that markets return to symmetry or equilibrium (S=D). While demand boosted more rapidly than the supply, then demand raises the price or cost level (PL) and the companies respond by an increase in the supply. For a lengthy period, it is assumed that the macroeconomic analysis acted in a similar manner as microeconomic analysis. After the year of 1930, a separate branch of economics named macroeconomics has introduced. There is a small controversy regarding the fundamental principles of microeconomics. Macroeconomics is furthermore controversial than Microeconomics. Diverse disciplines of macroeconomics recommend dissimilar explanations. Macroeconomics places better importance on experimental data and trying to explain it. Microeconomics have a tendency to work from the theory first. Similarities between Micro Economics and Macro Economics However, it is suitable to divide economics into branches- micro economics and macro economics but to some extent it is artificial. The similarities between the micro economics and macro economics are as follows- Principles of micro economics are used in macroeconomics for instance the flexibility of demand to sift in price. Microeconomics has reasonable effect on macroeconomics and vice versa. If there is an augment in oil prices, this will have a huge shock on cost-push inflation. If the cost decreases then, economic growth will increase rapidly (von Proff, 2015). Microeconomic gets effect for the housing market as the house price rises. But this real estate market is also considered as a macroeconomic variable and will influence economic policy. To utilizing computer paradigms of domestic behaviour in order to forecast the bang on macroeconomic they need some efforts. Key Issues Affecting UK Economy Recession along with Recovery The largest issue faced by the UK economy is the deficiency in economic recovery. Due to the decrease in GDP by 6% during 2008-09, some amount of the economy was improved; however, the current double dip recession in the year of 2012 has made the UK economy decline and depressed. For next few years, the main factors that affect the UK economy is the rising queries on UK economy that can the UK economy come again to an average pace of fiscal growth or remain fixed in a Japanese-style phase of economic stagnation (Rixtel, 2002). Issues Affecting Economic Growth The main problems that are affecting the economic growth of UK are as follows- The EU again entered into a recession and had reduced scenario of recovery specified the business's recent economic and financial policies. They misrepresent by small-scale saving or investment as well as the entire minute fall in public expenditure, as they remain fixed by means of their insufficient fall plans. Recently the government more concerned about the growth of their economy. On the other hand, rather than dealing with the problem with cumulative demand, the authorities fixed the hopes on the reforms of supply side. Tax deductions to increase the inducement. However, the governments sometimes overrate the potentiality of insignificant supply side policies to rise above the basic deficiency of cumulative demand (Smithin, 2003). Further falls in house market that is if the house price decreases it will hamper consumer wealth and lead to lower spending. Decreased consumer confidence. Significance of Business Economics The importance of business economics is discussed below- Business economics is considering the features of traditional economics that are applicable for making a decision in business in real life. Due to the modification of this policy, a manager can allow taking better decisions (Tobin, 2002). Business economics also include many useful ideas from other regulations such as psychology, sociology, etc. Sometimes business economics takes help from other regulations having behaviour on the business decisions in relation explicit and implicit limitations subject to which resource allocation has optimised.usiness economics make a manager a more proficient as model builder. It helps a manager to realise the essential relationship which characterised a given situation. Conclusion The value of business economics lies in borrowing and approving the implementation of economic theory. By including significant ideas from other regulations to take best business decisions, act as a catalyst in the process of decision making by the managers in different functional sectors in the organisation and finally carry out a social purpose by familiarising business decisions towards social responsibilities. References Allen, R. (1999).Financial crises and recession in the global economy. 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