business economics Essay - 831 Words

Table of Contents 1. INTRODUCTION 2. MAIN BODY 2.1 THE NATURE OF RESOURCE COST STRUCTURE AND THE PRACTICAL SIGNIFICANCE OF DIFFERENT COSTS 2.2 THE FACTORS INFLUENCING OPTIMUM SIZE AND THE SIGNIFICANCE OF DEMAND AND SUPPLY RELATIONSHIPS 2.3 UNDERSTANDING OF THE RELEVANCE AND LIMITATIONS OF ECONOMIC THEORY TO MANAGE DECISIONS 3. CONCLUSION 1. INTRODUCTION: From the economic perspective, there are a full range of wants from individuals, firms and government but there is only a few number of resources or factors of production such as land, labour, capital and enterprise. The raw material will come from land, taking the example of oil, gas. The labour relates to the individuals able to work. The capital covers machinery,†¦show more content†¦Equipment, everything used to bring all the materials together, for example, cranes, welding sets, computing time, mobile offices. It is also important to know how much money committed to spend at any point in time. 2.1.1The microeconomics perspectives: This focuses on the market behaviour of individual consumers and firms to help understand the decision making process of firms and households. This is at a level of individual buyer and individual seller, meaning demand and supply. How much to produce and how much to charge for it. The law of the demand is that the demand decreases when the price increases and the demand increases when the price decreases. Also more demand of a product results in an increase of the price the price of that product. (See graph below). 2.1.2The macroeconomics perspectives, focuses on the big picture of the national economy as a whole and provides a basic understanding of how things work in the business environment. The macrocosmic policy goals will be achieved by the monetary policy and the fiscal policy. The monetary policy is the management of the nation money supply, the decision of the interest rate and the banking system to promote economic growth, lower unemployment and inflation. 2.2The factors influencing optimum size and the significance of demand and supply relationship: The demand and the supply are two main concepts of the economy. 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