How does economics relate to business?
pohnpei397 | Certified Educator
While economics is not the same as the study of business, economics does relate to business in many ways. For example, the following economic ideas relate very much to business.
- Price elasticity of demand. This concept has to do with pricing. It has to do with how consumers respond to price changes. An understanding of this is vital to understanding how to price items.
- Factors that change demand. For example, one factor that changes demand is consumer tastes. Firms need to know this so that they can try to manipulate consumer tastes to prefer their product.
- Fixed costs and variable costs. Firms need to understand the various kinds of costs and how they affect decisions on how much of a product to make.
In these and many other ways, economics has relevance to business.