The discipline of business management which gained worldwide acceptance soon after the advent of large scale production in the USA and Europe in the early 20th century is ever evolving and still there are no signs of a final call. Big time entrepreneurs and career managers have emphasized the unequivocal contributions of ‘tools of economics’ in moulding it according to current needs and requirements. The Great Depression of the 1930s, the two world wars and the later oil crises have made all the more important in achieving efficiency at the highest levels.

Economics which has its genesis in the Greek word is all about managing scarce resources whether human or physical, in order to get the best out of them. Intensely increasing competition and the quest to present something unheard and unseen of, is driving firms and giant multinationals to adopt the quintessential ‘cost-benefit’ analysis of microeconomics. The basic principle requires a rational individual or a firm to equate its cost and benefits at the margin before undertaking any investment. Any such investment is worth undertaking only up to the point where the firm’s marginal profits equals its marginal cost (marginal cost and benefit calculations require basic calculus and the result is easy to interpret).
Recent studies have revealed the new pace with which consumers are altering their preferences thus making it important for firms to take a tab of these changes and responding appropriately. The theory of consumer behavior which was one of the first to be developed by early economists comes handy in this regard by introducing the concept of demand and supply elasticity. A concept similar to the on taught at intermediate level physics. The only difference is, it deals with individuals and firms rather than springs and quantitatively measures how consumers and producers respond to a given change in price, income and other related variables which affect consumer choices.

Economics not only aides business managers to function efficiently at a micro level but also guides them through turmoil at an aggregate level- the economy itself. Important macroeconomic variables like GDP growth rate, unemployment, inflation, current account balance and exchange rates are the indicators of general economic sentiments across the country and elsewhere. High GDP growth rates and reasonable rates of inflation ease the government’s burden over budget deficits (excess of government expenditure over income). Lower budget deficit in the short run and the resulting decline in debt in the long run create an optimistic environment in the market for goods and assets.

Some other areas where the subject of economics has played a decisive role in shaping management policies are:
• Firms paying pollution tax in return for emitting poisonous gases and discharging affluent into water bodies. This tax equals the value of the damage done to society and adds to the production costs of the firms. Simple tools of economics help in minimizing this cost.
• Hiring a skilled labor force out of a big unemployment pool.
Summarizing the above details we find decisional important roles in directing, organizing and controlling for decision making are much important at each level .Mainly to exercise as much control and influence over market to drive high efficiency.

Raghvendra Tolia
Electronics and Communication, IIIT Allahabad