ECON 124 - MANAGERIAL ECONOMICS

Refers to the application of economic theory and tools of analysis of decision science to examine how an organization can achieve its aims or objectives most efficiently.

A science of directing scarce resources to manage cost effectively.

The three branches of managerial economics.

Seek to predict and explain economic behavior.

An organization can solve its management decision problems by the application of economic theory and the tools of decision science.

Usually begins with a model and this abstracts from the many details surrounding the event and seeks to identify a few of the most important determinants of the event.

This assumes that the firm seeks to maximize profits, and on the basis of that, it predicts how much of a particular commodity the firm should produce under different forms of market structures or organizations.

Decision Sciences use the tools of mathematical economics and econometrics to construct and estimate decision models aimed at determining the optimal behavior of the firm.

Is used to formalize the economic models postulated by economic theory in equation form.

Applies statistical tools (regression analysis) to real-world data to estimate the models postulated by economic theory.

This disciplines study the business environment in which the firm operates and such, they provide the background for managerial decision making.

Give one reason for the existence of Firms.

An organization that combines and organizes resources for the purpose of producing goods and services for sale.

The forms of business organizations that exist in the economy.

Purchase resources or inputs of labor service, capital, and raw materials in order to transform them into goods and services for sale.

It is based on the assumption that the goal or objective of the firm was to maximize current or short-term profits.

These arise in any organization when it seeks to achieve some goal or objective subject to some constraints it faces.

Managerial economics applies to these:

Refers to the degree to which scale and scope of a business can be increased without a corresponding increase in cost.

Defined as a group of firms and individuals that are in touch with each other in order to buy or sell some good.

Management Decision Problems can be?

The firm would face Management Decision Problems with the application of these two models.

The firm would face Management Decision Problems with the application of these decision sciences.

How can optimal decision to the Management Decision Problems be achieved?

There is a presence of competition because there are more than one suppliers of a particular good.

Potential of a virm to influence the market price of a good or service by controlling its demand or supply.

Characterized by having competition for market share, high barriers to entry and exit, different products and services, and a small number of buyers & sellers.

The study of managerial economics focuses on the _______.

How much goods should the firm produce.

Managerial Economics can be regarded as an _____ that integrates economic theory, decision sciences, and the functional areas of business administration studies and it examines how they interact with one another as the firm attempts to achieve its goals most efficiently.

Is much less costly than numerous specific contracts. It is also highly advantageous to both the entrepreneurs and to the workers and other resource owners.

Some firms sacrifice short-term profits, why do they do this?

How does managerial economics apply to businesses?

2 distinctive aspects of the “new economy".