Economics vs Business Differences
Economics is used to analyze and understand human behavior along with the decisions that are taken by them and the level of impact the same has on the nation’s overall economy whereas business refers to the process where goods and services are exchanged between entities and people usually in exchange of money.
Economics and Business are closely related to each other and due to the complex nature of the global market and economies, often the two are considered as same. Although, both are branches to social sciences, however, there are some stark differences between them but they go side by side to each other.
While the business provides goods and services to the customer’s economics through the relationship of supply and demand decides how much quantity of goods to produce.
What is Economics?
Economics is a part of the social sciences that studies human behaviour with regard to incentives or resources available. Economics studies the actions and decisions taken by the employees, firms, customers, individuals and governments and their impact on the larger economy.
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What is Business?
Business is a part of the larger ecosystem for the exchange of goods and services are exchanged between two or more people, entities. A lot of external factors like the economy, the political situation of the Country, government laws and regulations impact the business and the organization.
Economics vs Business Infographics
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Key Differences
- Economics studies about human behaviour and the decisions are taken by them whereas business includes the exchange of goods and services between people.
- Economics considers the impact of the human decisions and government policies on the overall economy of the nation whereas business involves two or more individuals/companies and thus the exchange and impact is considered between them
- Economics has many concepts like supply and demand, the rate of interest, exchange rates, international trade, the balance of paymentsBalance Of PaymentsThe formula for Balance of Payment is a summation of the current account, the capital account, and the financial account balances. The term balance of payments refers to the recording of all payments and obligations pertaining to imports from foreign countries vis-à-vis all payments and obligations pertaining to exports to foreign countries. It is the accounting of all the financial inflows and outflows of a nation.read more whereas business is more of practical exchange and does not involve much theories and concepts. However, Business is done with the motive to earn the profit and increase the wealth of the shareholders’ and the Company
- Economics can be divided into different parts based on various classifications like micro and macroeconomics, pure and applied economicsApplied EconomicsApplied Economics is the implementation of theoretical economics principles to help solve a particular cause, issue, or situation. It is the use of economics as a tool rather than just describing the theory and can be applied at both the micro and macro levels.read more and Industrial and financial economics. However, business is divided into different types mainly based on the type of ownership i.e. – sole proprietorship, partnership, Company, and Limited liabilityLimited LiabilityLimited liability refers to that legal structure where the owners' or investors' personal assets are not at stake. Their accountability for business loss or debt doesn't exceed their capital investment in the company. It is applicable in partnership firms and limited liability companies.read more business.
- Economics defines various problems faced by the nation and the society and how various factors are interlinked with each other. Businesses try to solve some of these problems by providing people for their needs for the exchange of money.
- Economics is theoretical in nature whereas business is more practical and done with the motive to earn a profit
- Economists measure the economic variables and study the changes in such variables over time. They try to figure and conceptualize the interlinking between various variables and how they can affect the policies of the government. Businesses on the other hand work on a mission and a vision statement to do good for the larger society and create wealth for their shareholders. Business measures their performance based on various Key performance indicators (KPIs) which are measured on the financial performance of the Company. They measure and compare these KPIs with various similar businesses and Companies and also against their own performance.
Economics vs Business Comparative Table
| Basis | Economics | Business |
|---|---|---|
| Definition | Economics is a study about understanding human behaviour and the decisions taken by them and their impact on the overall economy of the nation. | Business is a process of exchange of goods and services between people and entities which involves the exchange of money |
| Key concepts | Key concepts of economics include supply and demand, the rate of interest, the rate of exchange, international tradeInternational TradeThe trading or exchange of products and/or services across international borders is referred to as international trade. It frequently includes other risk factors such as exchange rate, government policies, economy, laws of the other nation, judicial system, and financial markets that impact trade between the two.read more, the balance of payments etc. | Business does not have much-written theories or concepts as its main motive is to increase shareholder’s wealth. |
| Types | Economics can be divided into different parts – Microeconomics and macroeconomicsAnd MacroeconomicsMacroeconomics aims at studying aspects and phenomena important to the national economy and world economy at large like GDP, inflation, fiscal policies, monetary policies, unemployment rates.read more Pure and Applied economics Industrial and Financial economics | There are different types of businesses – Sole proprietorship Partnership Company Limited liability business |
| Measurement and analysis involved | Economists measure and value the changes in the variables. The measurement can be absolute or relative. Economics helps in measuring market interactions on the value of various products. | Businesses have short term and long-term goals based on their mission and future vision. The businesses define Key Performance Indicators (KPIs) to reach their objectives. KPIs are generally comparable across similar businesses and for a year on year metrics. |
| Problem definition | Economics tends to define various problems faced by the nation, its individuals and the government. The problems may include poverty, illiteracy, low economic growth, taxes, recession, the standard of living etc. | Businesses tend to solve various problems faced by the nation and most businesses are built on the identification of such problems and then solving them for the individuals. |
Conclusion
Both business and economics are branches of social sciences and generally go hand in hand. But there are some stark differences between the two which have been highlighted in the article. Economics while providing key concepts and theories on how to frame government policies, business depends on the needs and necessities of the people and tends to provide facilities and earning a profit for the shareholders.
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