Economics' Place in Business

Economics plays an important role in business. There's so much more to economics than investing in stocks and keeping track of money. In business economics, relationships between competing firms with related products, supply and demand, and scarcity of resources are looked at in a specific marketplace. Problems within businesses are also a main concern. These components are studied and connections between the business in question can be made to address their issues with production and/or distribution of goods. After reading about how businesses are all connected, it makes sense why supply and demand are so important with the scarcity of resources used to produce goods.

Credit: Investopedia

Staff, Investopedia. “Business Economics.” Investopedia, 31 July 2012, 

There are two kinds of economics when talking about pure economics. There is micro and macro. Microeconomics describes economics at a company level; while macroeconomics describes economics the national economy. Business economics focuses more on microeconomics than macro. After reading the article Importance of Business Economics, there are many factors to study and constantly work around within a business firm:

1.      Forecasting

·        Study patterns in the economy and focus on predicting trends of consumer tastes. Predict the quantity demanded by the consumers and anticipate changes affecting the demand levels.

2.      Production, Cost, and Profit Analysis

·        All three of these topics go hand-in-hand. To maximize profits, businesses need to find the most efficient way to produce goods. Every function of production is examined to find the most beneficial way to make a profit. The cost of the resources available and the means of production have many pros and cons.

3.      Price Determination

·        Many businesses base their prices off of the market. When coming up with prices, questions arise such as; what are competitors pricing their product at? How much do we have to sell to make a profit? How cheap can we buy resources to make our product?

·        However, if a company like Apple is competing to sell the latest phone with Samsung, why would their prices be so high when millions of iPhones and other Apple products are sold yearly?

4.      Business Objectives and Environment

·        The work environment plays a significant role in the business’s objectives. The business environment refers to the economy. This could be if the business cycle is expanding (low unemployment and high inflation) or contracting (high unemployment and low inflation).

·        All businesses have an objective. Their objectives can be simply about profit, or more in depth with sales and utilizing resources. 

Credit: LinkedIn Slide Share

Rigel Saving & Credit Cooperative Limited Follow. “Importance of Business Economics.”LinkedIn SlideShare, 11 Apr. 2014

Written by: Colin Bergman