A Simple but Comprehensive Guide for Profit Maximization. Welcome to another Volume of Business/Applied Economics. This time we deal with a concept a little more chall enging. So, buckle up!. Most business advice treats pricing like a marketing choice. Applied economics treats it like a measurement problem. Applied Economics is the use of economic theory and data to make real decisions about prices, output, and strategy. Pricing is often the fastest lever for profit because it changes revenue on every unit you sell, today. A 3 percent price change can move profit more than a 3 percent cost cut, especially when fixed costs are large. Sometimes the best move to increase total revenue is not to increase price, but maybe decrease it (Law of Demand, Scarcity) This blog specially walks through the core logic firms use, the Demand Curve , marginal revenue and marginal cost, and the rule that profit peaks at MR=MC . You’ll also get a simple tour of the standard diagrams (demand, MR/MC, ...
A vacation looks simple until you price it out. The flight and hotel according to you may be the cost of a vacation. But the real cost is bigger. You also give up shifts at work, time you could’ve spent studying, and maybe money you would’ve invested. That trade is the core idea of Applied Economics : choices have costs, even when they don’t show up on a receipt. In striving for vacation- you lose the utility you may get from the reservation option (the best next outcome). The same logic scales up. A country “chooses” between spending and saving, hiring and automation, consumption now and investment for later. Those choices shape GDP growth (Gross Domestic Product growth), and economics gives you tools to form a disciplined and accurate forecast. This blog aims to shows how to build a simple GDP growth view using components of GDP, the GDP deflator , indicators, basic models, and a careful role for Artificial Intelligence . You’ll also learn what economics can’t promise, so your fore...