Some of the main characteristics of business economics are as follows:

1. Micro in Nature:

Business economics is micro-economics in nature. This is due to the study of business economics mainly at the level of the firm.

Generally a business manager is concerned with problems of his own business unit. He does not study the economic problems of an economy as a whole.

2. Basis of Theory of Markets and Private Enterprises:

Business economics largely uses the theory of markets and private enterprise. It uses the theory of the firm and resource allocation of private enterprise economy.

3. Pragmatic in Approach:


Business economics is pragmatic in its approach. It does not involve itself with the theoretical controversies of economics. Yet it does not relegate the realities of business decision-making to the background by bringing in abstract assumptions. While economic theory abstracts from realities of the individual business units to build up its theories, managerial economics takes proper note of the particular economic environment in which a firm works.

4. Normative in Nature:

Business economics is also called normative economics which prescribes standards or norms for policy making. Business economics is prescriptive rather than descriptive in nature. In economic theory, we try to explain economic bahaviour: in business economics, we try to prescribe policies for a business manager which are most likely applied to achieve his objectives. In economic theory, we build ‘laws’ such as the law of Demand and the Law of Diminishing Returns. In business economics we apply these laws for policy planning at the level of a firm.

5. Macro Analysis:

Macro economics which deals with the principles of economic behaviour for the economy as a whole is also useful for business economics. A business unit operates within some economic environment which is in turn shaped by the behaviour of the economy as a whole. Therefore, business manager must know the external forces working over his business environment.

He has to adjust himself to the uncertainties of his business in wise manner. The important aspects of macro economics of special interest to business economist are national income accounting, business cycles, and economic policies of the government in relation to business activities.