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BUSINESS ECONOMICS

Business Economics

Equivalent QCF level: Level 4

Credit Value: 30

Learning time (hours): 300

UNIT PURPOSE

This unit provides the learner with an understanding of the fundamentals of Business Economics. It discusses economic theory and quantitative methods to analyse business enterprises and the factors contributing to the diversity of organisational structures and the relationships of firms with Labour, capital and product markets.

UNIT INTRODUCTION

This unit integrates the principle elements of business analysis as economic theory, enabling learners to acquire an overall understanding of these key business skills.

The unit begins by reviewing various techniques for collecting and presenting data. Important measures and techniques for making sense of raw data are then introduced. These techniques are widely used by businesses when analysing both their internal and external environments.

Spreadsheet packages are introduced which will allow learners to further develop their hands-on skills in the management of data.

Careful attention will also be paid throughout the unit to the interpretation and application of the various quantitative methods and techniques to the solution of real-world business problems. One of the main focuses for the design of this unit has been the additional development of relevant employability and professional skills relating to the unit’s learning outcomes.

The second part of the unit focuses primarily on the external environment and its impacts upon business behaviour. The main macroeconomic variables are reviewed and analysed, and their impacts assessed at local, national, and global levels of business activity. Practical business examples will be used to illustrate the impact of the external environment on real-world business decision-making and strategic direction.

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LEARNING OUTCOMES, ASSESSMENT CRITERIA AND CONTENT

To pass this unit, the learner must generate evidence that demonstrates all learning outcomes have been met through the achievement of all the unit’s

assessment criteria.

Learning outcomes On completion of this unit, the learner will:

Assessment criteria On completion of this unit, the learner can: Content

01 Be able to identify and assess the usefulness of key numerical, graphical and statistical indicators for business activity

1.1 Identify the aims and objectives of business economics

1.2 Evaluate applied economics and its usefulness to businesses

1.3 Identify basic statistical indicators related to businesses

Definitions of Business Economic/ Managerial Economics: Science of wealth, Science of material well-being, Science of choice making and science of dynamic growth and development

Applied Economics: Economic growth theory, development economics and macroeconomics

Relevance of Business Economics: aids in planning, organising, staffing, directing and controlling

Statistical Indicators: Descriptive statistics (collection, description, analysis, and summary of data), probability, and the binomial and normal distributions, test of hypotheses and confidence intervals, linear regression, and correlation, time series

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02 Be able to use quantitative indicators for business decision making

2.1 Explain the difference between qualitative and quantitative factors when performing a statistical or business analysis

2.2 Demonstrate the use of managerial economics techniques in business decision making

Criteria for choosing indicators: Action focused, Important, measurable, simple

Production analysis: techniques used to analyse production efficiency, optimum factor allocation, costs, economies of scale and the firm's cost function

Pricing analysis: techniques used to analyse various pricing decisions including transfer pricing, joint product pricing, price discrimination, price elasticity estimations, and choosing the optimum pricing method

Capital budgeting: Investment theory is used to examine a firm's capital purchasing decisions

Risk analysis: various uncertainty models, decision rules and risk quantification techniques are used to assess the riskiness of a decision

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03 Be able to use statistical techniques and software to support the quantitative analysis of raw data

2.1 Apply a range of data presentation and collection methods for data analysis purposes

Data Analysis: includes inspecting, cleaning, transforming, and modelling data with the goal of discovering useful information, suggesting conclusions, and supporting decision making

Business Analytics: Descriptive analytics, predictive analytics (predictive modelling using statistical and machine learning techniques), prescriptive analytics, decisive analytics

Spreadsheets: importing data, sorting data, using formulas, presenting data, analysing data using spreadsheets

Statistical packages: Statistical software (SPSS, Statistical, Statview), computer based interviewing tools (Sawtooth Ci3 and Sensus Q&A, Scytab), general-purpose statistical programs (Stata, S-Plus), survey tabulation programs (Statpac, Quantrix)

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04 Be able to assess how to allocate resources in different economic units

4.1 Explain the economic planning process

4.2 Explain the importance of resource allocation in organisations

Economic Planning: Intra-firm and intra-industry planning, enterprise resource planning

Resource Allocation: Market, planned, mixed economic system

Resource Management: Financial resources, inventory, human skills, production resources, or information technology

Resource Management techniques: resource levelling, traditional approach, resource limited schedule, resource breakdown structure

05 Understand the different types of market structure for both product and factor markets

5.1 Identify different types of market structures

5.2 Determine price using the laws of supply and demand while considering types of product and factor markets

5.3 Explain the impact of different market

structures on organisations

Price Theory: Price elasticity of demand, price elasticity of supply, Determinants of Price Elasticity, Graphical representation

Definition of market structures: based on organisational characteristics or competitive characteristics, features of market structure

Determinants of demand: Income, tastes & preferences, prices of related

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Determinants of supply: Production costs, firms' expectations about future prices, number of suppliers

Resource demand: Determined by changes in the output price, changes in productivity, changes in the number of buyers of the resource and changes in the price of related resources

Market structures: Monopolistic competition, oligopoly, monopsony, monopoly structure and the perfect competitive market

Factor market: Labour markets, the capital market, the market for raw materials, and the market for management or entrepreneurial resources

Product market: Arrangement for buying and selling of commodities (e.g. oil, steel, rice, vegetables, tyres, clothes)

06 Understand the likely impacts of various types of 'market failure' on business activity

6.1 Define the economic term ‘market failure’

6.2 Explain the impact of market failure on business activity

Market failure: reasons for market failure, the nature of the market, the nature of the goods, externalities, the nature of the exchange, Coase Theorem

Effects of market failure: government intervention e.g. government regulation, consumer and producer subsidies, rationing, reduced economic growth, distortions, rent seeking

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07 Be able to identify and use key macroeconomic variables

7.1 Describe key macroeconomic variables

7.2 Explain ways in which the microeconomic variables are measured

7.3 Identify the impact of macroeconomic variables on business activity with examples

7.4 Assess the impact of macroeconomic variables on organisations

Macroeconomics: includes performance, structure, behaviour, and decision-making of an economy as a whole, rather than individual markets

Basic macroeconomic concepts: Output and income, Unemployment, Inflation and deflation

Macroeconomic policy: Monetary policy and fiscal policy

Macroeconomic variables: Economic output (Short-run business fluctuations & Long-run economic growth), unemployment and employment, inflation, interest rates, government finance and deficits, international trade balances and finance, productivity

Individual macroeconomic variables: banking, interest rates, inflation measures and changes in government regulations’ influence on multiple areas of economic growth

Key Macroeconomic Variables: Economic output, unemployment rate, inflation rate, interest rate, Gini coefficient

Measuring outcome: Real Output or GDP (Production Method, Income Method, Expenditure Method), GDP per capita, purchasing power parities

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Measuring inflation: price indexes, Recent actual inflation rates in selected regions/countries, survey of forecasters

Measuring interest rates: nominal interest rate, expected inflation rate, expected real interest rate

08 Be able to apply business principles to actual business contexts

8.1 Identify and explain basic business principles and ethics using corporate examples

8.2 Apply business principles to different types of organisations

Relevancy to different types of Organisations: non-profit and government agencies as well as conventional, for-profit businesses

Regulatory compliance: Standards and regulations, UK Corporate Governance Code, compliance data

Basic Business Principles: integrity, skill, care and diligence, management and control, financial prudence, market conduct, customers' interests, communications with clients, conflicts of interest, customers, clients' assets, relations with regulators

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GUIDANCE FOR TUTORS

Business Economics

DELIVERY & ASSESSMENT

It is important that tutors use a range of teaching and guidance methods to ensure that their learners

meet the intended learning outcomes for this unit. This would include participating or revising

lectures/notes, attending webinars, workshops, individual/group assessments and draft feedback for

assessments. However, learners should always be encouraged to participate in independent learning

using the resources on the IMSS, e-library and Mintel reports. Learners need to use analytical thinking,

participative approaches and investigative mindsets in order to be able to enhance their learning

experience through reflection of theory in conjunction with their own experience. It is important to

plan the delivery of the unit to ensure that learners have enough time to undertake the relevant

research needed to meet the learning outcomes and to facilitate self- learning.

Managerial economics is a branch of economics that applies microeconomic analysis to specific business decisions. As such, it bridges economic theory and economics in practice. Learning Outcomes 1 to 3 require that learners understand the various quantitative indicators that can be used in making business related decisions. Tutors can provide information on statistical terminology that that can be associated closely with data analysis requirements in organisations. Learners can use relevant statistical analysis on real world situations and assess their importance and impact on business activity. Wherever possible business examples and up-to-date case study materials should be used to illustrate the application of these principles to real-world business decision making.

Learning outcomes 4, 5 and 6 involve the understanding of interactions between firms and the business environment. Tutors are expected to discuss important economic terms such as price, demand, supply, market structures and resource allocation. Learners can make decisions based on the economic theories learnt, and ensure effective resource utilisation.

Learning outcomes 7 and 8 discuss the theoretical aspects of macroeconomics and their impact on businesses conducted in an economy. Tutors can provide information on important macroeconomic variables and show learners how to measure each of those variables using existing data. Learners can determine the impact these variables have on decisions such as setting price, allocating resources, hiring staff and competitive strategies.

Learning outcome 9 focuses on analysing business practices according to a variety of business principles and ethics. (Tutors should explain the differences between principles and ethics.) Learners should use their practical knowledge to identify those organisations which conduct their businesses according to accepted ethics and common business principles. This will also enable them to understand the responsibility of an organisation towards the environment it operates in.

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GUIDANCE FOR TUTORS

Business Economics

OUTLINE LEARNING PLAN

The following outlined learning plan can be used as a guidance document in conjunction with the unit assessment. It is simply a way in which this unit can be delivered.

TOPIC AND SUGGESTED ASSIGNMENTS/ACTIVITIES/ASSESSMENT

Introduction to unit and programme of learning

Tutor discussion of the theoretical models and concepts; quantitative business indicators, data analysis tools and the use of spreadsheets and statistical packages

Learner input on practical examples analysing data using statistical methods

Learner research on data management contributing to Assignment 1

Tutor input on resource management, economic theories such as price mechanism, demand and supply theories

Learner input on the measurement of macroeconomic variables

Learner research on market structures that can be seen in the corporate world contributing to Assignment 2

Review of unit and programme of assignments

PROGRAMME OF SUGGESTED ASSESSMENT/ASSIGNMENTS

The following table illustrates the respective assessments for the unit and identifies the corresponding assessment criteria.

Assessment Criteria covered

Assignment title

Scenario Assessment method

1.1, 1.2, 1.3, 2.1, 2.2, 3.1,3.2

Assignment 1 Assuming that you are the Business Development Manager of any organisation of your choice, formulate a report that encompasses the following elements. The report should be based on a product/service offered by the chosen organisation.

Report

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GUIDANCE FOR TUTORS

Business Economics



Assignment title


1.1, 1.2, 1.3, 2.1, 2.2, 3.1,3.2

Assignment 1 – Cont.

The report should:

1. Identify quantitative indicators relevant to the chosen product/service of the organisation and assess their importance and impact on business activity

2. Discuss the role of quantitative indicators in the organisational decision making process

3. Identify the different statistical packages used by the organisation and explain with the use of examples, how they can be used to analyse raw data

Report

4.1,4.2,5.1,5.2, 5.3,5.4,6.1,6.2, 7.1,7.2,7.3, 8.1,8.2

Assignment 2 As the Business Analyst of an organisation of your choice, you have been asked to prepare a report that covers the following requirements in relation to a particular product/service.

The report should encompass:

1. The organisations basis of allocating resources for its main functions while identifying and analysing the market structure of the chosen product or service

2. Using examples, identify and analyse the macro economic factors that have an impact on organisational functions

3. Explain what is meant by market failure and identify and explain a type of market failure that can impact the chosen organisation

Report

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GUIDANCE FOR TUTORS

Business Economics



Assignment title


4.1,4.2,5.1,5.2, 5.3,5.4,6.1,6.2, 7.1,7.2,7.3, 8.1,8.2

Assignment 2 – Cont.

Identify a macro economic change that can have an impact on your organisation’s Business to Business marketing process and discuss the opportunities and threats that can occur as a result of this change

For the above context, provide recommendations on how the organisation can adapt its resources in order to maintain its national and global level competitive advantage while capitalising on the above change

Report

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RESOURCES

Business Economics

TEXTBOOKS

Burton, G., Carrol, G. and Wall, S. (2002) Quantitative Methods for Business and Economics - 2nd edn. FT/Prentice Hall

Griffiths, A. and Wall, S. (2011) Economics for Business and Management 3rd edn. FT/Prentice Hall

JOURNALS

Journal of Business Economics

Small Business Economics

The Journal of Applied Economics

Applied Economics

Applied Economics Perspectives and Policy

WEBSITES

The Marketer http://www.themarketer.co.uk/

Forbes http://www.forbes.com

Hubspot http://blog.hubspot.com/

Business Case Studies http://www.businesscasestudies.co.uk

http://www.themarketer.co.uk/

http://www.forbes.com/

http://blog.hubspot.com/

http://www.businesscasestudies.co.uk/

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