Question

a discussion on business decision making using economic data and models. More than one paragraph, please. Thanks

Answer 1

The process of business decision making is a complex process which involves using microeconomic data to make a variety of critical choices. Different economic models rely on number of factors that affect the process of decision making. We will discuss different factors & types of data in detail below.

1) Demand analysis: Every business tries to forecast the demand for their product. The demand for a product changes in response to change in price, prices of substitute goods, consumers income, taste & expectations. The demand is also affected by age differences in a population & age composition.

2) Cost analysis: The cost analysis involves analyzing fixed costs & variable costs. The analysis of marginal cost, short-run cost and long-run cost helps the decision makers to compare cost of production of different periods and thereby to evolve suitable policies in controlling costs and deriving suitable profits.

3) Pricing policy: This is a primary function in a decision making process. Pricing of products & services depend upon the cost of production and at the same time price of substitutes and the nature of competition. Pricing policy affects profits which in turn determine the existence and the growth of the firm.

4) The state of economy: while making business decisions it is important to consider the data related to state of the economy. Different economic indicators forecast a downturn or growth momentum in the economy which makes it easier to make business decisions.