Business advice

Most people cringe when their hear economics mentioned. The problem is that a basic understanding is necessary if you want a shot in this race we call the world of business. I thought I was going to die from stress from the first class I took.

I will help you get over that potential barrier. It took me five classes to realize that textbooks are written only to be understood by other professors. And, most of them couldn’t explain the basic principles to their students if their life depended on i

I found outside reading and then I started tutoring business majors who were having a harder time than I did. With my writing, I have been offering that insight for 26 years.

Now, here is the deal, the principles of economics effects every business decision and action you ever take. Miss out on it and you learn the hard way when you get to bankruptcy court.

We are going to start with the very basics and then go on to delve into pricing for the next slice of this pie.

People have a hard time grasping the concept of scarcity. William F. Buckley, Jr in his heyday gave nonstop lectures on how things will be better if the world would go along with his idea of redistribution of wealth. The problem is that wouldn’t change a thing, other than who was suffering from poverty

I had a friend who thought that there were enough goods for everyone, including gas supplies, but ‘it’ was just in the wrong hands.

Scarcity simply put is: there is not enough of any given commodity for which there is a demand. I am sure old fashioned dirt on the side of the road and weeds have little demand in the aggregate market. Someone, on the side of the academics would probably argue there is, but most of us aren’t going out of our way for a sale on dirt.

Economics is the study of the distribution of scare resources. This boils down to who is going to buy what. What price is going to fly for the time being, how to get others to come and buy and how to predict what all of the market stats might mean down the road. It is not an exact science, despite what you may have heard. There are always variables that may interfere in predictions and analysis. So we go by the principles and then we wait.

The beginning of everything past scarcity is opportunity cost. Without this knowledge, you will make miscalculations time and again. I have heard it defined as the loss of the usage of funds for one opportunity.

In English, it means when you buy something, you miss out on the chance to use those funds for something else. Money also falls under the definition of a scarce resource. So, if you put the money in the wrong market, and another investment you had been thinking about skyrockets, you have lost.

Another commodity most don’t think about is time. So, let’s go to an example that was in my first text. It is good anywhere. If you are going to use your time to spend a semester at any university, what is the full cost? It is not just usual: tuition, etc. If you weren’t going to school, you would be out working somewhere. You would be earning an income. So, the true cost is loss of income and college needs.

Many corporations try to find ways to get around paying benefits. They hire temp workers in an alleged cost-cutting endeavor. Temp workers, in most cases, are not the most loyal folks around. So, the company is then forced to spend more money training someone new. They failed to understand the opportunity cost. There was a chance to recruit a loyal employee, but they made the wrong choice, erroneously thinking they were saving money. They put their money on the wrong investment.

Next time, we will break down the components of what to consider before putting a price tag on your product or service.

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For more: www.bellbusinessreport.com

>Laura Bell

writer@well.com