Business economists focus on supply and demand decisions made by businesses and consumers to maximize profit. They use microeconomic theory to analyze factors that influence behavior and market trends, including pricing and production decisions. Advanced degrees are common in the field.
Economics is the study of how society allocates limited resources to manufacture or purchase goods and services. A business economist will focus on the decisions made by businesses and consumers related to supply and demand. This can include decisions that will affect production, pricing, and profit maximization.
Most professional economists will have advanced degrees. This could include a master’s or doctorate in economics. Those with a bachelor’s degree in economics may be able to find some entry-level positions with particular employers, such as supply or demand analyst positions.
At the root of business economics is microeconomic theory. Microeconomics investigates the various factors that influence the behavior of individuals and companies. Unlike macroeconomics, which focuses on an entire economy, microeconomics is more concerned with the various factors that influence supply and demand.
Business economists help companies decide how much of a good to produce. The objective here is to maximize profit at all times. Producing too much of a good can lead to a surplus in the market, resulting in lower prices and therefore lower profits over time. Not producing enough can leave a company out of a growing market and reduce profit potential.
Several factors can be used to decide how much of a good to produce. The current cost of raw materials and current or projected consumer demand are just two of the factors. A business economist will use various economic statistics, such as trends related to raw material prices, to help analyze current market trends.
Determining how to price various goods and services represents another priority for a business economist. Pricing a good or service at a competitive price ensures that a business remains competitive in the marketplace. To make a profit, the price must, at a minimum, exceed the firm’s cost to produce or provide the good or service.
Business economists take into account several additional factors when pricing a good or service. For example, the consumer price index (CPI) represents the amount an individual is willing to spend on a specific set of goods. By analyzing CPI-related trends, a business economist can make decisions related to whether the current price of a good or service will rise or fall.
A business economist must ensure the profitability of the corporation. Keeping an eye on general market conditions also plays a role in making important decisions. This includes monitoring booms and busts in the market and researching emerging markets. Another component of the job may involve negotiating with suppliers for reduced prices, common with bulk purchases and taking advantage of discount periods.
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