Economics, both macro and micro, is an essential concept in the business world, and it figures prominently in classrooms across the country. Economics courses begin, usually, in high school and continue into college; they even surface again in Professional Master of Business Administration (PMBA) programs. Understanding economic principles is essential to decision-making in the business world.
Macro- and microeconomics help decision-makers navigate the costs and benefits of different economic strategies. Students in PMBA programs study how supply and demand dictate market behavior. These students also learn the importance of market failures and what gains from trade really mean. All of these concepts relate directly to the study of economics. Since both macro- and microeconomics play roles in the business world, it is important to understand how each relates to global markets. Students can expect an economics course to cover both.
Breaking it Down: Microeconomics
Microeconomics is the study of individual units. For example, the company or organization you work for is an individual unit, as is a person or a household. Microeconomics enables decision-makers to plan for a business’s financial future based on its past performance. For example, if Company A sells pens, decision-makers can look at the microeconomic data to determine which color of ink sells best. If the data reveals that, say, black ink sells best, the company can then determine whether manufacturing more pens that use black ink — perhaps in different styles — would benefit the bottom line.
Adding in the Big Picture: Macroeconomics
Macroeconomics is the study of larger economic systems, such as the national or global economies. These large economic systems encompass smaller, individual microeconomic systems and provide a bigger picture of economic activity. When companies perform well in these markets, hiring increases, which, among other benefits, can reduce inflation. In the example above involving Company A and its black pens, macroeconomics can help the company determine how many pens to make, what price to sell them at, whether to create new designs or any combination of these.
Macroeconomic data offers insights into the strength of the national or global economies from year to year, including trends like consumer spending. In our example, if Company A determines that consumer spending has increased from one year to the next, decision-makers can feel more confident bringing more black pens to market.
For students enrolled in PMBA programs, economics courses prepare future decision-makers to decipher market data and make plans with confidence.
Learn more about the University of Tennessee Chattanooga online MBA program.
Have a question or concern about this article? Please contact us.