Macroeconomics is intertwined with business because business is affected by the factors that constitute macroeconomics. Macroeconomics is a branch of economics that deals with issues relating to factors that affect the economy of the country as a whole. Such factors include areas like the rate of unemployment, inflation, business cycles and Gross Domestic Product (GDP). Entrepreneurs and other people related to business must take such factors into consideration as part of their market analysis.
The role of macroeconomics in business can be seen in way the condition of the economy affects individual businesses. For instance, during a recession, the behavior of customers and consumers of goods and services change to reflect the change in the economy. Such changes can be seen in the way the demand for goods and services drop and the manner in which such a reduction affects the balance sheets of the various businesses.
An example of the role of macroeconomics in business is the way in which the reduction or increase in demand for products affects the decisions by companies to expand or to scale down their rate of production. For instance, a boom in the economy may lead to a demand for goods. Then companies will increase production, hire more employees and even expand their businesses, all with the aim of meeting up with the increase in demand.
The effect of microeconomics in business can be seen in the way businesses plan their sales and marketing strategies based on the effect of macroeconomic factors like inflation, business booms and recessions. When there is a recession and the demands for goods are low, businesses usually change their marketing strategies to reflect the inevitable low demand for products and services. Such marketing strategies may be based more on aspects like reduced prices and cheaper alternatives that will appeal more to customers trying to conserve finances during such periods.
One of the important effects of macroeconomics in business is the effect of governmental policies on the businesses. Such governmental policies may include facets like the imposition of heavy taxes, stringent rules and regulations, a reduction in taxes and other facets like the imposition of import quotas. For example, a cigarette company may find out that the government regulations regarding tobacco companies are very strict. Such regulations may include precise requirements as to labeling, packaging and the payment of hefty taxes. Companies must evaluate these effects of macroeconomics in business in order to find out how they affect the success of their business.
