Economics

It is often wrongly concluded that economics is irrelevant to running a business. In fact, economic factors affect businesses and decision making at three levels. At the macro level, factors such as the business cycle, interest rates and exchange rates directly affect product demand and cost of production.

At the market level, the type of competition determines profitability and business strategy. At the company level, efficiency principles have a direct bearing on business success, principles such as marginal analysis, opportunity cost and profit maximisation.

If you ignore economic principles, you will be unable to figure out likely changes in market conditions, you will be unable to understand competitive forces and you will have little idea of how to allocate resources efficiently.