Why Is Microeconomics Important

There has always been a relationship between the factors of economics and the world of business. Economics is a crucial study to know at first hand when the interest of running a business sparks, but many have asked, what is the relationship between the two and why is it so important? The importance of economics in the business world is a necessity because without knowing the odds of making decisions, the stakes are extremely high and after spending my time studying the factors of microeconomics, I believe I understand why this would be important for an entrepreneurship and I will discuss a few of the factors that our found in the study of microeconomics that would be important to know when starting a business.
Firstly, the reason for microeconomics …show more content…
There is a lot of competition and being able to gain more business would put any business owner at an advantage of becoming one of the most successful business owners. In business, the purpose of elasticity is to measure the degree of response from a buyer or seller to change in the price of a certain good or service. This would be important to understand in a case such as a business owner who would want to lower prices or have a sale. The business owner would have to figure own how much of a change in price to make and how much of a response would be given in return to the lower prices for instance and another consideration is how much money could be at stake of losing when changing prices. Most likely, the business owner would want the increase in purchases to outweigh the change in price in a case like this. This is why understanding how to calculate the elasticity and understand the process of it would be important for a potential business …show more content…
This is the evaluation of the level of consumer demand for certain goods or services to the presented supply. The competition in the business industry is extremely high and this provides many choices for consumers. Unfortunately, in a scenario like this, this could result in supply exceeding the demand which could then result is the failure of some businesses. This is why the principles of demand and supply should closely be studied. Demand and Supply are essential tools of economics analysis. In business, this is the kind of data that we would need in order to make smart business decisions. The higher the demand for the product, the more the producer could possibly charge for it, but how much could they charge without demand going down? There also needs to be enough supply in order to satisfy the consumer’s needs. This is why the market for the good would need to be studied in order to find out the prices that other producers are charging in order to compete against them to gain more consumers without adjusting prices too much which could result in more of a loss rather than a gain in