manegerial economics

Application of Economic Analysis
Name
Institution
Application of Economic Analysis
Economic analysis.
The world has great wealth in scarce resources. Economist works to ensure that organizations can maximize the available resources. Before an organization makes an important decision, they would benefit if they were aware of the exact condition of an economy. The economic analysis involves two critical methods: inductive and deductive method. In the deductive method of economic analysis, one starts from a general idea to a particular conclusion. While in the inductive analysis a case starts from a particular and end up to a general conclusion.
Deductive reasoning follows a certain procedure (Johnson, 2006). The first step involves observation, followed by using a concept called deductive reasoning. In deductive reasoning, it involving using logical reasoning to process information. This is followed by testing the observed data. This type of reasoning is preferred due to its simplicity. The fact that this method of economic uses deductive reasoning replaces the need for experimentation in economics.
The main reason as to why many companies fail at their few years is a problem in the allocation of finances (Libert, 2018). Business leaders tend to put an overemphasis on assets that are tangible. They tend to view intangible assets as being risky. They also perceive intangible assets as costly to manage. This perception makes them lose on great potential from new forms of intangible assets like data and network.

They continue investing in the old form of properties like property and other physical assets.
In case am a manager, where am in a position to control assets of a company experiencing a shortage in finance. I would fund the necessary sectors that are critical for the smooth running of the organization. The first job would involve determining areas that are required for the organization to run and the amount of capital they require to run. In case the organization is not facing such a critical shortage of capital, I would review the cost of production to determine if the organization can be run at a lower cost without reducing the output.
Reference
Johnson‐Laird, P. N. (2006). Deductive reasoning. Encyclopedia of Cognitive Science.
Libert, Barry. “Most Leaders Fail At Capital Allocation”. Forbes, 2018, https://www.forbes.com/sites/barrylibert/2017/10/08/most-leaders-fail-at-capital-allocation/#796a514d634c. Accessed 23 Oct 2018.