We have theories everywhere, whether we abide by them or not and these theories form the outline on which practical construction takes place. If a business runs on the economics of money, it has several underlying theories pertaining to the minutes to the grossest aspects of functioning. When macroeconomics takes care of the larger sections of the economy, microeconomics takes in its pocket the fight to survive and win from the side of business firms and contributing individuals.
Microeconomics makes your business practically viable, but it works on the basis of well-crafted theories, some of which are mentioned in this post below.
Rationalism holds the survival instinct in the world of economics too: A firm involved in an economic activity to create profits should invest in steps to minimize resources while maximizing production. Amassing raw materials, capital, labor force and other resources without prior assessment regarding the necessity
Budget allocation: Preparing a budget is critical for the completion of any project, big or small. Sticking to the budget ensures that the project remains viable until and after completion and hence establishes a smooth trajectory from resources to income and then continues the cycle to deviate necessary funds for operational continuity. A slight wavering from the pre-laid budget can cause trembles in the overall financial stability of the business.
Demand and supply: The balance between the demand for products and their sufficient supply rests on a thin line of sustainable production. If the balance goes off-the-road towards either side, the business plunges into a loss. Take the case of the mining software Bitcoin Trader which offers accounts for trading in the cryptocurrency market. For running and maintaining the software, back-end/front-end support and necessitating updates, it needs capital, which has to be obtained through the membership accounts. If it gathers too many currencies and trading markets intended for the customers, many of which remain unutilized by the clients, the supply becomes surplus. This leads to capital loss and reduction in the value of its products and disrupts the entire supply chain.
Consumer Demand Theory: The demand for products from the consumers actually drives the business and studying their preferences. The production should be oriented for those goods or services which offer any kind of benefit to the consumers like cost-effectiveness, better quality, easy availability, good service etc.
Theory of production: Production is the conversion of input into the output and indicates how efficiently the available raw materials are converted into products which are in good demand and utility.
The elasticity of the variables: The proportionality of two variables or response in one variable when a related variable change is its elasticity and it helps to measure how elastic the prices of demand and supply are, the income and expenditures and between various factors of production.