Bandula, Charena F.

1BSA-NonABM1
Assignment Nos.2 Introduction to Economic Decision-Making

1. Write all the basic features of managerial economics that you learned from
this video Managerial Economics. How do you think managerial economics
can solve the basic problem of society of human behavior and scarcity of
resources?

What is Managerial Economics? According to the investors' book (2018),

managerial economics can be a stream of management studies that emphasizes
solving business problems and decision-making by applying the theories and
principles of microeconomics and macroeconomics. In other words, managerial
economics deals with the application of concepts and theories to solve practical
problems in the business and to come up with the proper decision to solve the
problem. In the video of Introduction to Managerial Economics, there are eight key
learning areas that cover theatrical ideas in economic and give some practical
applications about areas that can help business owners as well as the people or
citizens.

First are the limits and scarcity. We are all aware that the reason why the economic
problem of scarcity exists is that the needs and wants of the people are endless
however the resources available to satisfy needs and wants are limited. That is the
reason why every business owner must choose among different alternatives
collection of goods and services that it should produce using the limited resources
and at the same time obtain the goal of the business which is to make a profit. One
example is oil. According to UKOG Energy for Britain (2020), oil has become the
world's most important source of energy since the mid-1950s. As a business
enterprise, you should know how to allocate your resources to produce oil in the
market and at the same time to satisfy the needs and wants of your consumers.
Matthew Wride, the president of decisions stated that “Good leaders accept that: 1)
scarcity is a problem that will never be solved, and 2) that, in the words of Voltaire,
the “perfect is the enemy of the good.” Second is the theory of demand and supply.
Demand alludes to the willingness or ability of a buyer to pay for a specific product.
In other words, demand can be characterized as the amount of a product that a
buyer wants to buy at a particular cost and time period. The demand for a product is
influenced by a number of components, such as the cost of the product, change in
customers’ preferences, and standard of living. One simple example is the iPhone
11, when the apple company released the iPhone 11 in the fall of 2019, there was a
large demand for the new phone. Surprisingly, Apple wasn’t able to meet this
demand because the company hadn’t expected this many consumers to purchase
the iPhone 11 over their higher-end models. According to Prof. Benham, “The
demand for anything, at a given price is the amount of it which will be bought per
unit of time at the price.” Third, long-term and short-term costs of production. As
business leaders, you’re going to be concerned about costs and you have to know
how to measure them, what they mean and their significance. This is important for
business leaders to know the status of the business if it is a perfect competition or
imperfect competition. Fourth is resource compensation. Base on the second
episode of our podcast series, The Economic Lockdown, they discuss the factors of
production. According to that episode, economists divide the components of
production into four categories which arrive, labor, capital, and entrepreneurship.
Let us not forget that goods and services are scarce because the resources used
for them are also scarce. Consider a pair of blue jeans as an example. The denim is
made of cotton and cotton is grown on the land. The land and water utilized to
develop the cotton are limited and seem to have been utilized to develop a variety
of distinctive crops. The laborers who cut and sewed the denim within the
production line are limited labor resources who seem to have been creating other
goods or services within the economy. The machines and the production line
utilized to produce the pants are limited capital resources that might have been
utilized to deliver other products. This shortage of resources suggests that
producing some products and services clears out other products and services
unproduced. The fifth is the government. It is important for business leaders to
know the status of our government in society. Business leaders must know the
government’s influence in the economy, the government’s influence on how
resources are consumed, and how resources are allocated between groups through
spending and taxes. Sixth is energy economics. It is also important for business
owners to know the costs of oil, electricity, natural gas, and other factors of
production. Think about it, how the business can perform without these factors and
we are all aware that these are all scarce resources. That’s the reason why
business owners must be aware of this aspect of the economy. Seventh is health
care. In the economy resources are scarce and that makes it hard to meet all of the
wants of the people so we have to choose which wants are met and which wants
are not met. Finally, immigration. According to Griswold a senior research fellow,
immigrants boost America’s economic growth as well as the production company of
America by providing much-needed skills. Many of our fellow Filipinos work abroad
to have a better salary and I realized that this is also important not just for the
workers but also for the business to have a large production by hiring workers from
other countries.

Limits and
Scarcity

Immigration Demand
and Supply

Health KEY LEARNING Costs of

Care AREAS Production

Energy Resource
Economics Compensation

Government

Managerial economics deals with the application of concepts and theories to solve
practical problems in the business and to come up with the proper decision to solve
the problem. Managerial economics is very important especially to businesses and
other organizations. The reason why the economic problem exists is that the needs
and wants of the people are endless however the resources available to satisfy
needs and wants are limited. That is why every business enterprise must choose
among different alternatives collection of goods and services that it should produce
using the limited resources and at the same time obtain the goal of the business
which is to make a profit. We have to utilize the limited resources that we have in
order to produce product and also to meet the needs and wants of the people.
2. How do various economist view the nature and scope of managerial
economics? How do they applied this concept in the real business world?

Economics is ordinarily divided into two parts, Macroeconomics and

Microeconomics. According to Investopedia (2020), microeconomics is the study of
individuals and business decisions, while macroeconomics looks at the decisions of
countries and governments. These two factors can help the business enterprise
when it comes to decision-making. It will also increase the effectiveness of decision-
making by expanding and sharpening the analytical framework used by managers
to make decisions. Well said by Milton H. Spensor and Louis Siegelman that
“Managerial Economics is the integration of economic theory with the business
practice for the purpose of facilitating decision making and forward planning in
management”. The managerial economic also provides strategic planning tool to
help the business owners and managers to analyze the problems and formulate
rightful managerial decisions. Decision-making is very crucial when it comes to
solving a business problem.

3. Identify the various economic models and how do you think this economic
model can solve the economic problem of choice behavior and scarcity.

People always want to know everything about what’s happening to the real world.
Microeconomics theory allows us to be informed about the things that we want to
know more in an organized way. In the video of parts of an economic model, the
professor explains the three different styles of models about microeconomic theory
overview models. The first one is max benefit-cost, the second is max benefit st
constraint, and lastly, min cost st constraint. According to Professor Hodgson, in
microeconomics textbooks, there are three basic players that can be maximized
which consists of people, firms, and the government. These economic models can
help us to solve the economic problem which is scarcity by modeling human
behavior. In that way, we can identify on what factors we could have decisions to
solve the economic problem.
References

https://theinvestorsbook.com/managerial-economics.html
https://www.ukogplc.com/page.php?pID=74#:~:text=Oil%3A%20lifeblood%20of%20the
%20industrialised,people%20all%20over%20the%20world.
https://decision-wise.com/4-ways-great-leaders-can-overcome-company-scarcity-issues/
https://appleinsider.com/articles/19/09/20/demand-for-iphone-11-outpacing-supply-chain-
expectations
https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-2-factors-
of-production
https://www.mercatus.org/publications/trade-and-immigration/benefits-immigration-
addressing-key-myths#:~:text=Immigrants%20boost%20America's%20economic
%20growth,opportunities%20for%20native%2Dborn%20Americans.
https://www.investopedia.com/ask/answers/difference-between-microeconomics-and-
macroeconomics/