Every manager must have the ability or skills of identifying business opportunities and providing providing goods and services at profit in the light of the business opportunity.
Identifying and evaluating a business opportunity means demand is to be estimated. Economics subject has its special focus on analysis of consumer demand. Managers have to use the economics theory to come out with demand forecasts for potential businesses and existing businesses. Actually Philip Kotler, the celebrated author of the book Marketing Management, is an economist by education and he said he worked in marketing as marketing is economics.
In the economics production cost analysis is also undertaken. Ideas like economies of scale, marginal diminishing productivity etc. are important theories in production economics which are to be used by managers.
Economics has subareas which are more focused on specific issues related businesses. Engineering economic analysis deals with the profitability analysis of income expansion and cost reduction expenditures proposed by engineers in the production systems. It can be used for expenditure or investment proposals made by any body like even shares and bonds can be analyzed using methods of engineering economic analysis.
In managerial economics, Joel Dean described the application of economic analysis to many managerial decision making like advertising expenditures and pricing decisions when multiple products are there etc.
Industrial economics examines why certain industries have higher profit margins at a point time. Monopoly and Oligopoly may be the reasons for higher profits. Hence creating barriers to entry becomes a competitive activity for firms. But on the other hand, society tries to support more competition.
Managers have to acquire the relevant theories from various economics subjects and be on the lookout for new theories that support their work.
Even accounting tools are used in business conceptualization as proforma income statements, balance sheets and cash flows statements need to be prepared to submit to financial organizations to fund a business.
Economics - Revision Articles - Based on Samuelson's Book - List
Managerial Economics - Review Articles - List
Financial, Cost and Management Accounting - Review Notes List
Second article for revision for the day:
Peter Drucker - Business Organization - Economic Function - Social Responsibility
January Month Management Knowledge Revision Plan
MBA Core Management Knowledge - One Year Revision Schedule
Updated 22 Jan 2016, 30 Dec 2014