Microeconomics is the study if individual economic units. These single units too have a great impact on the overall economic status. Microeconomics focuses on the factors that affect individual economic choices. The reason for the study of the microeconomics is to give the student a thorough understanding of microeconomic principles and how they affects decision that individuals have to make daily.
In this project, explaining the effects of customers in business will be the core issue. Customers play a major role in business formations, and this project seeks to explain the customer’s effect to economics.
Customers are the key drivers for all the businesses. The established businesses take into account the nature of the customers their needs and seek to satisfy their needs. Customers in any economic setup have a more economic impact. Businesses have to develop the customer base for profits to start streaming in. If the customer numbers increase so does the profits, the business will increase its employees thus creating more job and if it employees a big number that means the economy is growing.
Customers triggers competitions among the business firms, the firms need to deliver quality goods and services than its competitors and at a lower price. Most firms before entrance into a market need to identify what the markets lack and capitalize on that. (Pranab ) Customer demands and buying power can be used to measure the progress of an economy by the government. If the purchasing power is high, it means the economy is doing good, but if the purchasing power is down. The government needs to exempt taxes on some products to make them affordable.
The issue on demand of goods should be taken into considerations when making major economic decisions. This is because purchasing power reflects the individual financial wellbeing. The government should reduce taxes on the basic required products. By doing so the prices of these products will be reduced, this means the majority of the customers can now afford to purchase them. This improves the standards of living in an economy.
Customer base means that people have the ability to purchase. Businesses should take this into consideration to make different products to suit different tastes and preferences for various consumer groups. By targeting different consumer groups means creating more markets and this improves the profit margins of the business.
The government should fund local businesses to help in creating local businesses that target local consumers. By doing so the infrastructure will grow, more jobs will be created, and taxes the government gets from the businesses will improve the government revenue. This revenue will be used in providing various activities such as security for the citizens. (Pranab )
Although the issue of customers means availability of market has many opportunities, there are risks that need to be faced and challenged. The first risk that needs to be faced is competition from the other businesses that were established earlier and had a bigger loyal customer base. Entering in a market with other businesses needs a lot of capital for advertisement and creating a successful brand.
Government’s taxes might be too much; this leads to high product prices, and the demand goes down since not many people can afford to buy. Businesses need to capitalize on the production of bulk, this means producing big masses reduces the production cost, and taxes imposed will not have a big impact as it would have if the production were little. (Yohe 30 )
The risk of change of the customer preferences, the taste on a particular product or service might change according to various factors such as weather or economic conditions, businesses should be flexible enough to keep up with the trends for their survival. Change of technology, for the Businesses to thrive, they should be up to date with the emerging technologies. The change in political stability or reforms, this is a risk most businesses take while establishing businesses.
To evaluate the Purchasing power or the customer base, some issues need to be taken into consideration. The demand and the supply curve, if the demand is greater than the supply, then there is a market available. Demands should be considered when making decisions on trading in any market. Demands show that there are customers to consume a certain product or service. If the supply does not satisfy the demands, there is the availability of market. ( Edwin 87)
Also, the businesses need to check on the production cost of the goods and services. If the production cost is more than the profits, then the market is not a healthy place for trading.
In conclusion, the availability of market means that there are customers who consume the products and services that a business has to offer. Markets are the main drivers for business to exist in the first place. For businesses to thrive, they should identify the market needs and also put into consideration the government policies as they develop the business plans for their products.
There are various risks that need to be considered while developing a market or a customer base, and the main objective is to satisfy the customer needs, businesses should strive for the satisfaction of their customers. Business strategies should be flexible to suite different external conditions and for profits too to be realized.
Consumers play a major role in balancing the market equilibrium on consumption of goods and services. Markets are the major driver of businesses in all economy and for a business to succeed it has to capture the consumers by satisfying their needs.
- Bardhan, Pranab, and Christopher Udry. Development microeconomics. OUP Oxford, 1999.
- Mansfield, Edwin, and Gary Yohe. Microeconomics: theory/applications. USA: WW Norton & Company, Inc.; 7th ed., 2004.
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