September 30, 2022
What C-Suite Executives Need to Know About the State of the Economy

The majority of those who hold executive positions in companies have studied economics at some point, but the majority of them were taught the incorrect part of economics, or at least wrong for someone who is in charge of a firm. An executive or the owner of a small business can have a better understanding of how the external environment affects sales and costs by putting a little more emphasis on the business impacts of economic analyses.

The implications of economic theory for public policy are covered in significant depth throughout economics coursework. Therefore, in order to stabilize the economy, macroeconomics ties into both fiscal and monetary policy. When discussing topics such as rent control, minimum wage, and antitrust laws, microeconomics is often brought up. The emphasis placed on policy is peculiar when one considers the fact that the vast majority of students will not go on to work in government, but rather will find employment in the private sector or with nonprofit organizations where they will be required to deal with fluctuating levels of income and expenditure.

There is a vast body of information available that might be of use in making decisions pertaining to company. On the macroeconomics side, certain industries, such as commodities, are more susceptible to the ups and downs of business cycles than others, which are less susceptible (health care). After a recession, some businesses, like the property market, come back to life sooner than others (business equipment). The executives of businesses would be wise to examine previous cycles in their respective industries, looking at the degree of cyclicality as well as the timing of sales rises and declines.

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The majority of seasoned business professionals have a solid grasp of the microeconomic theory of supply and demand; yet, elasticities are extremely important when applied to real-world scenarios. Consider, for instance, how much more expensive oil has become. According to the blackboard sketches, the supply does not appear to be responding favorably to the increasing prices. However, the vast majority of economics classes avoid the question of how long it takes for supply and demand to reach a state of equilibrium. It has been found that growth in both incomes and industrial production can lead to a significant increase in the demand for oil. However, it can take many years of exploration, drilling, and the construction of pipelines in order to increase oil supply. In the meanwhile, prices skyrocket, just to fall again once the additional supply becomes available on the market.

The discipline of economics teaches students the significance of making decisions at the margins. Reframing the issue as the value of one additional diamond in comparison to one additional gallon of water provided an explanation for the age-old conundrum of why diamonds are more valuable than water, despite the fact that water is required for life to a lesser extent. This explanation was provided many years ago. In a similar vein, decisions on the conduct of company should not be reduced to a binary choice between print advertising and online advertising. Instead, competent marketing analysts evaluate the value of an additional dollar spent on print advertising in comparison to the value of an additional dollar spent on advertising on the internet.

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The idea that resources are limited is fundamental to the study of economics. At conferences, those considered to be management experts give talks about the many tasks that should be added to the to-do lists of corporate executives. However, an executive’s time is a limited resource, and it is frequently considered to be the most important of a company’s other limited resources. The way in which that time is allocated, both by the boss and by the managers on the first level, determines whether or not the endeavor will be successful. A relatively insignificant aspect of economics that has a significant impact is scarcity, in all of its myriad forms and manifestations.

The bulk of the economics knowledge that is necessary for business executives to have is covered in Principles of Economics. It is not enough to simply understand the material well enough to pass the examination; this is merely the beginning. The ability to rapidly and intuitively apply fundamental ideas is essential for the role of business management. The advanced classes are beneficial in that they help to reinforce the fundamental fundamentals.

Numerous economics professors take justifiable pride in the positive influence that their field has had at various points in the history of economic policy, as well as the prospective benefits that could result from improved policy in the future. However, the vast majority of students will not go on to become policymakers; rather, they will work in businesses or other organizations that are influenced by market forces (such as non-profits and local governments). If they apply economics to these problems, not only will it benefit them in their professions, but it will also improve the economy as a whole by making more efficient use of its resources.

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