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Economic Resources-Land, Labor, Capital, Entrepreneur

Managerial economics analyzes major management decisions using economic tools and techniques. It connects traditional economics with decision sciences to develop tools for optimal managerial decision making. The fundamental questions addressed are when markets are attractive for entry, how to motivate employees, and what pitfalls to avoid. The objective of firms is to maximize profit by determining revenue, costs, and exploring alternatives to arrive at the choice with the best consequences. Economic optimization is the process of making the best managerial decision, whether maximizing profit or minimizing costs.

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Myca hanna fortin
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36 views2 pages

Economic Resources-Land, Labor, Capital, Entrepreneur

Managerial economics analyzes major management decisions using economic tools and techniques. It connects traditional economics with decision sciences to develop tools for optimal managerial decision making. The fundamental questions addressed are when markets are attractive for entry, how to motivate employees, and what pitfalls to avoid. The objective of firms is to maximize profit by determining revenue, costs, and exploring alternatives to arrive at the choice with the best consequences. Economic optimization is the process of making the best managerial decision, whether maximizing profit or minimizing costs.

Uploaded by

Myca hanna fortin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Managerial Economics- study on how to manage Value of the Firm

scarcity. -present value of each expected future.

FUNDAMENTAL QUESTIONS:
1. When are the markets too attractive that entry
becomes appealing?
2. How to effectively motivate employees to produce Where:
more? π , π ,π =expected profits in each year, t
Economic Resources-Land, Labor, Capital, Entrepreneur =appropriate interest on discount rate.
3. What pitfalls must be avoided?

Managerial Economics- analysis of major management


decisions using the tools of economics because it uses
the tools and techniques of economic analysis to solve
managerial problems. Managerial economics connects Constraints:
traditional economics with decision sciences to Technology
develop vital tools for managerial decision making. Resource Scarcity
Contracts
ECONOMICS Gov’t Laws and Regulations
1. Macroeconomics
2. Microeconomics ALTERNATIVE MODELS TO THE THEORY OF THE FIRM
1. Satisficing Model- managers strive for a
Economic Concepts+ Decision Sciences= satisfactory level of performance rather than
Optimal Solution to Managerial Decision Problems attempting to maximize profits.
2. Maximizing Sales Model- managers want high
Steps to Better Decision Making: sales for high compensation
1. Define the problem.
2. Determine the objective. W= AI+PI
Firms objective: Maximize Profit
TI=TR-TC Oppurtunity Cost Concept- foregone value
Where:
TI- profit Role of Business
TR- total revenue 1. Conforming to the basic rules of the society.
TC- total cost 2. Maximizing shareholder value.
3. Explore the Alternatives. 3. Responsible investment oppurtunities.
4. Predict the consequences. 4. Social stability & broad prosperity.
5. Make a choice. 5. Capitalizing in community and workplace health
6. Perform sensitivity analysis. programs.
7. Conduct the evaluation.
ECONOMIC OPTIMIZATION
Theory of the Firm - the process of arriving at the best managerial decision.
- How the firms behave? Maximization- profit
- basic model of business. Minimization- cost
- acccdng to this theory the firm is thought to maximize
profit.
- It is all about long run expected value maximization.
EXPRESSING ECONOMIC RELATIONS
- express through graphs, tables

Marginals as the Derivatives of Functions


- marginal value.
- change in the dependent variable associated w/a 1-
unit change in a independent variable.

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