Economics and business are today’s global topics. Business is an economic activity.
Although both are terms used in social science, they are very different.
Economics and business go along with each other. Economics studies the demand and supply of products in the economy.
The business offering of products and services and sells them.
Key Takeaways
- Economics studies the production, consumption, and distribution of goods and services, while business is the application of economic principles.
- Economics focuses on macro-level policies that affect the economy as a whole, while business is concerned with micro-level decision-making.
- Economics aims to maximize social welfare, whereas business aims to maximize stakeholder profits.
Economics vs Business
Economics is the social science that deals with producing, distributing, and consuming goods and services. Business refers to the activities involved in producing and exchanging goods and services for profit and focuses on specific industries, firms, and markets.
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Comparison Table
| Parameters of Comparison | Economics | Business |
|---|---|---|
| Definition | It is the study of people using their limited resources to fulfil their requirements. | It is the economic activity in which goods and services are exchanged to get money. |
| Key Metrics | Exchange rate of currencies, fiscal deficit, per capita income, repo rate, GDP growth rate, etc. | Net profit margin, financial leverage, gross profit margin, asset turnover ratio, etc. |
| Expands | It intends to expand the welfare of the society. | It intends to expand the prosperity of the shareholders. |
| Issues Addressed | Economics focuses on the issues like taxation, interest rates, poverty, government expenditure, unemployment, etc. | The business focuses on the issues like organic and inorganic growth, product differentiation, product positioning, cost minimization, etc. |
| Main emphasizes on | It puts stress on how inadequate resources can yield the best. | It puts stress on the best use of inadequate resources. |
What is Economics?
Economics is a branch of social studies used to study the actions and decisions of firms, individuals, employees, governments and customers to know their influence on the country’s economy.
Economics is a wider topic that covers many topics, such as mathematics, politics, international relationships and many more. The basic concepts behind economics are supply and demand, rate of exchange, inflation, balance of payment, production, rate of interest, international trade and many more.
With the help of economics, people can think logically and read various theories to apply them to understand the implementation of economies worldwide better. People can easily understand the complex issues of the economy to maximise its benefit.
The different types of economics are microeconomics and macroeconomics, industrial and financial economics and pure and applied economics. Microeconomics consists of the economic decisions dealt with at the micro level.
Macroeconomics consists of the economic decisions dealt with at a large level.
In industrial economics, there is a study of industries and markets and corporate sectors, including firms of all levels and sizes. In financial economics, the main focus is on the monetary activities.
Pure economics deals with the principle lines of the arguments and pure logic. Applied economics is an implementation of economic theories to predict probable results.
What is Business?
A business is an economic activity where goods and services are exchanged between two or more people to earn money. The basic business requirements are the funds and the customer base.
The business requires funds in various forms and a customer base to which the products can be sold to make profits.
Business is a collection of various activities and behaviour, including accounting, business strategy, sales and marketing, finance, product development and analysis, human resource and management. It also studies the rapid change in the environmental conditions to know its impact on the overall value.
It also considers the other factors of the economy, government rules and regulations and the political condition of a nation to know the impact on any organization and any industry.
The basic concept behind any business is to profit and amplify the shareholders’ wealth. An increase in the wealth of any business results in an increase in the prices of a company’s stock which increases the shareholders’ net wealth.
Many types of businesses include partnership, limited liability, sole proprietorship and company. A company is under the ownership of the shareholders that invest in the business capital to run its activities.
A partnership is a business in which there is a relationship between two or more people responsible for carrying out business activities. All partners share the profit and loss obtained in the business.
A single entity or person owns and runs the business in a sole proprietorship. In limited liability, the liability of any partner cannot cross the money already invested in a partnership or a limited liability company.
Main Differences Between Economics and Business
- Economics studies how people use their resources to fulfil their requirements. In contrast, business is an economic activity exchanging goods and services for money.
- The main types of economics are micro-economics and macro-economics, industrial and financial economics and pure and applied economics. In contrast, the main types of business are partnership, limited liability, sole proprietorship and company.
- The basic economics concepts are supply and demand, exchange rate, production, etc. In contrast, the basic concept of business is to make a profit and amplify the shareholders’ wealth.
- Economics intends to expand society’s welfare, whereas business intends to expand the shareholders’ prosperity.
- Key metrics of economics are the exchange rate of currencies, per capita income, GDP growth rate, etc., whereas key business metrics are net profit margin, gross profit margin, etc.
- https://proformas.ljmu.ac.uk/4001BUSHN.pdf
- https://books.google.com/books?hl=en&lr=&id=zwPSLEFLwmkC&oi=fnd&pg=PR12&dq=Economics+and+Business&ots=lPtvIDwWSV&sig=JG8sZOe7kTWBLkHUj9xl4UZCyCk
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
