Economics is a science that studies how individuals, businesses, governments, and societies allocate scarce resources to satisfy their wants and needs.
Primary Implication
The barrier for most business owners to overcome is their unwillingness to study a body of knowledge they need to know. They allow their businesses to struggle because they aren’t willing to put forth the extra effort required to learn something they don’t know.
Commit today to learn the economic theories of opportunity costs and the law of supply and demand. Knowing both will change how you manage your business for the better.
Overview
The study of economics represents the theories, principles, and models that deal with how the market establishes the value of work. Economics attempts to explain how wealth is created and distributed in communities, how people allocate scarce resources, and issues that arise in dealing with human wants and their satisfaction.
The problem with applying micro or macroeconomics teachings to owning a profitable business with predictable cash flowing through it and reserves in the bank lies in the fact that economics is more academic than practical. The two most practical theories from microeconomics are opportunity costs and the law of supply and demand, two of the most important concepts we learn in economics.
Understanding both economic theories matters to every business because price affects demand. Higher prices decrease the demand for any product or service. When the price of an item or service is high, individuals must consider that buying the item may prevent them from purchasing another, more valuable item. As a result, the opportunity cost of the item under consideration may be seen as too high. If this is the case, there will be less demand for that item at that price point.
