How Microeconomics Affects Business

Topics: Inflation, Macroeconomics, Economics Pages: 4 (793 words) Published: April 26, 2015
McKenzie 1
Lorraine McKenzie
Professor Frazer
Business 100
April 21, 2015
How does microeconomics affect business?
Microeconomic is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in economy. Microeconomics looks at how a specific company can maximize its production and capacity so it could lower prices and better compete in its industry. Businesses use microeconomics data to make a variety of critical choices, any one of which could mean the success or failure of their enterprise.

How does macroeconomics affect business?
Macroeconomics is the field of economics that studies the behavior of the economy as whole and not just specific companies, but the entire industries and economies. This study looks at economy-wide phenomena, such as Gross National product and how it is affected by changes in McKenzie 2

unemployment, national income, rate of growth, and price levels. Macroeconomics look at how an increase or decrease in net exports and how it will affect a nation’s capital account or how the Gross Domestic Product (GDP) would be affected by unemployment. Businesses uses macroeconomics to determine whether expanding production would be welcomed by the market or will consumers have enough money to buy the products, or will the products sit on shelves and gather dust.

Why is it important for businesspeople to understand the fundamentals of each? It is important for businesspeople to understand the fundamentals of micro- and macro- economic because they are both essential to sustain the overall growth and standard of the economy.

What are the four stages of the business cycle?
The four stages of the business cycle are:
1. Prosperity: is characterized by low unemployment...

References: http://www.investopedia.
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