Economics in Marketing

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Economics is a science that deals with production, demand and supply of goods and services. Economics is divided into two main components--micro and macro economics. Microeconomics is used to analyze the behavior of individual consumers, producers and firms. Macroeconomics is used for analyzing factors pertaining to the country’s economy--such as economic growth rates, inflation and unemployment. Economics makes extensive use of statistical and mathematical models for decision making and analysis.


Economics can actively be put to use by a company for marketing its products. The various available alternate routes and marketing channels are analyzed. The one that maximizes sales and profits is chosen. The marketer also keeps in mind that he must curtail costs, losses and risks.

The preferences of the customers are studied and analyzed and the product that they desire is made available to them.


Economics enables the organization to base it managerial decisions on it. The managers are better equipped to analyze as to the products they must produce, the quantities thereof, how to route and plan their production, marketing and sales functions. From the marketing angle, the organization is able to decide on the best advertising campaign, the best distribution channels and distributors.


Managers use different economic tools for different business scenarios. The customers respond differently o different situations. Their behaviors have to be studied and analyzed. The organizations use different analytical methods such as regression, correlation and risk analysis and production and pricing functions. Production functions are used to determine the level of production at which the profits would be the max. The pricing function establishes the opportune price at which the maximum number of customers would be willing to buy this company’s produce. Risk analysis is used to evaluate the risks present in all phases of production, marketing and supply. On the basis of regression analysis, the firm is able to evaluate its tolerance levels to changes in prices of raw materials and increase in laborers’ wages.


Several benefits accrue to the firm by using economics. It is able to make intelligent informed decisions. This is done after a careful evaluation of all the available routes. The firm is able to stick on the most viable and feasible plans.

From the marketing perspective, the firm analyzes amongst others, all the advertising and distribution methods that lie ahead. The methods that penetrate the markets the most and lure the maximum number of customers into buying the company’s products are zeroed on.

Also, the companies achieve economies of scale and specialization by using economics.


The individual conducting economic studies for the company must be selected after a careful screening process. The individual must be one who understands both the theoretical and practical aspects of market economics and can therefore make intelligent choices.



About the Author

Suchi Moorty has vast writing experience in magazines and on various online portals. She has been associated with the print media since 2003, and is very comfortable in writing on fields such as health care, chemistry, physics, life sciences, management, human resources, finance and accounting. Moorty has a Master of Science in biology.

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