MAN.ECO: #1

• MANAGERIAL ECONOMICS

  • Means the application of economic theory to the problem of management. It applies economic theory mainly microeconomics to business and administrative decision making, because it uses the tools and techniques of economic analysis to solve managerial problems.
• Mansfield

  • provides link between economic theory and decision sciences in the analysis of managerial decision making.
• ECONOMICS

  • Social science, studies human behavior in relation to optimizing allocation of available resources to achieve the given ends.
• An inquiry into the nature and cases of the wealth of the nation

  • Adam smith's book he wrote in 1776
  • bible of capitalism (beacuse it was the first ever book written about economics.
• Adam smith

  • father of modern economics
  • He said "Scarcity is the main economic problem because people have unlimited wants but the world has limited means.
• Managerial Economics

  • study of production, distribution, and consumption of goods and services.
• Revolves with choice

  • the main thing about economics is that everything __
• Why do we need to make choices?

  Scarcity -- Choices -- trade off -- opportunity cost
• trade off

  • sacrifice one thing to get more of another
• opportunity cost

  • benefits that you lost
• Production Possibility Frontier

  • the best representation on how trade-offs lead to
• Choice

  • a the core of economics, there is a __
• 3 main questions:

  1. what to produce
  2. how to produce
  3. for whom to produce
• Apply economics for the improvement of managerial decisions

  • the purpose of managerial economics
• Microeconomic focus

  • where managerial economics focuses
• understanding of how to interpret and forecast macroeconomic measures

  • is useful in making managerial decisions.
• economics provides key terminology and a theoretical foundation
• Whole business structure

  1. Business
  2. accounting & finance
  3. marketing
  4. human resource
  5. operations
• middle managers

  • they have broken lines on the way to the top of the organization because they are the basis for executive decisions/strategic decision
• CETERIS PARIBUS

  • Economic models is that they are simplified representations of real-world organization and its environment.
  • Point of using models is not to match the actual setting in every detail, but to capture the essential aspects so determinations can be made quickly and with a modest cost.
• Economics is not the answer for everything.

  • As it is, the world is multidisciplinary. Each and every disciple have different solutions.
• Nature of managerial economics:

  1. inherently interdisciplinary
  2. microeconomic perspective
  3. decision-oriented
  4. applies to real-world problems
  5. problem-solving approach
  6. pragmatic and prudent
  7. future-oriented
  8. promotes continuous improvement
• Microeconomic perspective - concentrates on the analysis of individual firms, consumers, an markets. Understand the behavior of specific market segments, assess the demand for their products  and determine optimal pricing and production strategies.
• Decision-oriented - deeply rooted in the practical world of business. Aims to provide actionable insights and solutions to managerial problems. Managers can use these to decide on resource allocation, pricing strategies, production levels, investment choices, etc.
• Applies to real-world problems - it's not limited to theoretical discussions but involves the practical application of economic principles, thus letting managers assess the implications of decisions.
• Problem-solving approach - focuses on identifying and framing specific managerial issues or challenges and then using economic analysis to address those issues.
• Pragmatic and prudent - encourages managers to take a practical and cautious approach to decision-making by considering various constraints, risks, and trade-offs.

  ~ pragmatic connotation is "kuripot"
• Future oriented - considers the long-term consequences of decisions, aiming to create sustainable and profitable outcomes. (posterity: survivability of the company in the future)
• Promotes continuous improvement - promotes the idea that decisions can be refined and optimized over time.
• Types of managerial economics

  1. descriptive
  2. normative
  3. prescriptive
  4. positive
• Descriptive - valuable foundation, looking into the past,  and previous market trends, all about benchmarking; data
• Normative  - policy formulation and strategic planning and provides a framework for recommending courses of actions. (strategic policies)
• Prescriptive - current/present. execution once strategies are in place. Detailed implementation plans, allocating resources judiciously, and establishing mechanism; monitoring
• Positive - external factors. understanding and explaining the impact of economic variables on managerial decisions and outcomes. Helps managers to comprehend how changes in economic variables influence decision outcomes.
• Executive and managers

  • the responsibility of overseeing and making decisions for these organizations
• Reason why we are forced to choose between resources and output

  Scarcity
• Trade off

  • sacrifice is the result of choices
• Future cash flows

  • what kind of movement do economic decision makers attempt to predict?
• Net cash flows

  • cash inflow and outflow's difference
• Cash

  • is said to be business' "ball"