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Why is Economics an Important Part of Business?

Why is Economics an Important Part of Business?

Economics and business go hand in hand.  Although supply and demand are vital, it’s essential to acknowledge that there’s more to it than that.  Economics affects everything from the wages you need to pay your employees to whether you can expect a loss or profit through the year.  Closely paying attention to economics and the financial layout of where you’re based can make or break a business.

Wages

A sturdy understanding of economics is vital for the wages of your employees and higher-ups. There are a couple of approaches to this, and it depends on what kind of company you want your employees to work for. 

On the one hand, you could use the local economy to figure out a livable and comfortable wage for your employees and make a space where they’ll be excited to come in and earn their paycheck.  On the other hand, you could factor in how much your local competitors are paying their employees and how much profit leaves them using regional economics. 

Most companies follow the second option.

Hiring

Economics has to inform how you hire, or you could be setting yourself up for a lawsuit or two.  Paying attention to the economic layout of the area around you and who you hire, as a result, can significantly impact how your company is viewed by both your employees and the public. 

An economic expert would be able to go over any hiring or firing policies you have and discuss how your company could create the best space for your employees and customers.

Profits

The local and national economy decides your profits.  If the supplies you need to run your business suddenly go up in price, then you’re losing profit. If instead, the demand for your product goes up, you can up your price and then increase your earnings. 

Paying attention to the economy and how economics works can help you maximize how much your business makes versus how much the competition loses.

Losses

Profits and losses are like a twin-edged blade that you have to balance just right.  By paying attention to how much your employees are paid, how much you spend on products, and how much you sell your product, you can create a space that allows for low losses

Unfortunately, despite all of that, you may have a low buyer turnout.  Advertising costs money, and so does getting products to shops and onto shelves.  If you find your company is losing money, it’s time to dig back through your business’s economic layout.

Market Structure

The structure of the current market will decide how your business fails or succeeds.  This could mean that the system puts your product at low or high demand or that it makes your raw supplies you put into it higher or lower in cost. 

The market structure as a whole can explain what wages your employees are asking for and whether you can afford to pay them that, or if you’ll have to cut back on how many employees you have.

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