Describe the nature and scope of business economics.

Business economics is a field of applied economics that uses economic theory, principles and techniques to make business decisions; its nature explains what kind of subject it is, and its scope explains the areas it covers.

The nature of business economics:

1. Microeconomic in nature: it deals mainly with the individual firm and the best use of that firm's limited resources.
2. Normative science: it is concerned with "what should be" — the objectives of a firm and how to achieve them — and judges good decisions against bad.
3. Realistic: it studies business using actual conditions in the field, not merely abstract assumptions.
4. Use of economic theories: it applies traditional economic theories, such as those on profit and income distribution, to business decisions.
5. Use of macroeconomics: though mainly micro, it also uses macro topics like business cycles, national income and foreign trade.

The scope of business economics:

1. Demand analysis and forecasting: identifying the determinants of demand and forecasting future sales before planning production.
2. Cost and production analysis: estimating and controlling costs and studying the cost–output relationship for sound pricing and profit planning.
3. Pricing decisions, policies and practices: determining price under different market forms, along with pricing methods and differential pricing.
4. Profit management: dealing with the nature, theories, measurement and planning of profit under uncertainty.
5. Capital management: planning and controlling capital expenditure, including the cost of capital and project evaluation.
6. Objectives of the firm: examining goals like profit maximisation, sales maximisation and satisficing that guide price and output.
7. Business environment: studying outside influences such as business-cycle phases and the money and capital market.

Thus, business economics is applied, normative and firm-centred in nature, and in scope it spans every major decision area of a firm — demand, cost, price, profit, capital and the wider business environment.