Question

How are economics and finance related? How are they different? Based of The essential of corporate finance ed 9

Answer 1

Both the economics and finance are related to each other as they provide direction to the business units towards their ultimate goal of making heavy profits. The economics is the theoretical direction to the business enterprises, whereas Finance is the practical aspect of the direction to business units. The economics tells what the production components are, how inflation affects production and what are the various production cycles. The finance use to provide fuel to the theoretical part provided by economics and give practical shape.

Both Economics and Finance are different from each other. The economics are the study of the production, consumption a distribution of goods and services. The economics explains inflation, national income, GDP, changes in employment, etc. Economics tells us the economical way to do production.

On the other hand, Finance says how various parts of production cycles are financed and what will be the profit and what will be sales price to extract the same from the production process. Finance provides the economical sources of fund to finance the production and distribution part of operation.