WEEK 2

• Economics -the study of how these scarce resources will be allocated to satisfy the needs of human being
• Managerial economics is concerned with the application of economic concepts and economic analysis to the problems of formulating rational managerial decisions”. Edwin Mansfield
• Managerial economics

  • a branch of economics which studies the application of theories, tools and findings of economic analysis to managerial decision making in all types of organizations, including government agencies, educational centers, not-for-profit organizations and of course, business enterprise”
• deals with the performance, structure, and behavior of an economy as a whole

  Macroeconomics
• studies the actions of individual consumers and firms;

  Microeconomics
• Economic theory and economic analysis are used to solve the problems of managerial economics
• Scope of Managerial Economics 


  Demand Analysis

  Profit Management

  Capital Management
• Demand Analysis and Forecasting Demand analysis and forecasting involves huge amount of decision making.
• Profit Management Success of a firm depends on its primary measure -- profit.
• Capital Management • Capital management involves planning and controlling of expenses
• The most important function in managerial economics is

  decision making.
• • Economic analysis is required for various concepts such as demand, profit, cost, and competition.
• In this way, managerial economics is considered as economics applied to “problems of choice’’ or alternatives and allocation of scarce resources by the firms.
• Gross Domestic Products


  It is the total goods/services produced in an economy.

  • If GDP is high, increased in consumer spending.
  • It is a favorable environment.
• Consumption 


  The spending of households on goods and services.
• Investment


  Capital goods (Equipment, Machinery)
• Government Spending 


  expenditure by government sectors
• Unemployment Rate 


  percentage of workers who are unemployed and actively seeking for an occupation.

  • high unemployment rate = weakened labor market.
• Inflation rate 


  the rate of price changes in good and services
• Investment Rate 


  BSP as central bank

  borrowing and lending.
• Exchange Rate


  Value of peso.