Economics is the study of how society allocates limited resources to manufacture or acquire goods and services. A business economist will focus on the decisions made by corporations 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 can include a master’s degree or doctorate in economics. Those with a bachelor's degree in economics may be able to find some entry-level positions with private 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 firms. In contrast to macroeconomics, which focuses on an entire economy, microeconomics is more concerned with the various factors that influence supply and demand.
Business economists help corporations decide how much of a good to produce. The goal here is to maximize profit at all times. Producing too much of a good can lead to a surplus in the marketplace, resulting in lower prices and thus lower profits over time. Not producing enough can leave a corporation out of a growing marketplace, and reduce profit potential.
Various factors can go into deciding how much of a good to produce. The current cost of raw materials and the current or projected demand of consumers are just two of the factors. A business economist will use various economic statistics, such as trends related to raw goods prices, to help with analyzing current market trends.
Determining how to price various goods and services represents another priority of a business economist. Pricing a good or service at a competitive price ensures a corporation remains competitive within the marketplace. In order to make a profit, price must, at minimum, exceed the corporation’s cost to produce or supply the good or service.
Business economists take several additional factors into account when pricing a good or service. For instance, the consumer price index (CPI) represents the amount an individual is willing to spend on a specific set of goods. By analyzing trends related to the CPI, a business economist can make decisions related to increasing or decreasing the current price on a good or service.
A business economist must ensure the profitability of the corporation. Keeping an eye on overall market conditions also plays a role in making key decisions. This includes monitoring periods of expansion and contraction in the marketplace, and researching emerging markets. Another component of the job may involve negotiating with suppliers for reduced pricing, common with bulk purchases, and taking advantage of discount periods.
