Explain the scope of business economics.

Business economics is the branch of applied economics that uses economic theory, tools and techniques for business decision-making, and its scope covers the main decision areas of a firm.

1. Demand analysis and forecasting: it identifies the factors influencing demand and forecasts future sales, which is essential before planning production; it covers the determinants of demand, types of demand, elasticity and forecasting methods.
2. Cost and production analysis: it estimates and controls costs for profit planning and sound pricing, covering cost concepts, the cost–output relationship, economies and diseconomies of scale, and the production function.
3. Pricing decisions, policies and practices: since price drives a firm's revenue, this covers price determination under different market forms, pricing methods, differential pricing and price forecasting.
4. Profit management: because profit measures success but is uncertain, this covers the nature, theories and measurement of profit, along with profit policies and planning.
5. Capital management: it handles the planning and control of capital expenditure — the cost of capital, types of investment decisions, and project evaluation and selection.
6. Objectives of the firm: a firm fixes objectives such as profit maximisation, sales maximisation, utility maximisation or satisficing, which guide its price and output decisions.
7. Business environment: it studies outside influences such as the phases of the business cycle, the money and capital market, and the market structure the firm operates in.

Thus, the scope of business economics runs across every major decision a manager faces — demand, cost, price, profit, capital and the surrounding business environment — linking economic theory to practical business choices.