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Managerial Econ

The document discusses concepts related to managerial economics including demand, supply, elasticity, forecasting methods, and factors that affect demand and supply. It also discusses concepts like the economic problem of scarcity, objectives of the firm, and different business factors.

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Hazel Mendoza
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19 views3 pages

Managerial Econ

The document discusses concepts related to managerial economics including demand, supply, elasticity, forecasting methods, and factors that affect demand and supply. It also discusses concepts like the economic problem of scarcity, objectives of the firm, and different business factors.

Uploaded by

Hazel Mendoza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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 Organization can understand and help solve its management problem by the?

Application of economic theory and tools of decision science


 The economic theory postulates that demand (Q) of a particular commodity (X) is a
function (or dependent on) the price of related goods (PXY) and income (I). Assuming
other factors constant, this model can be mathematically stated as: Q = PX, PXY and I
 Managerial economics is the application of economic concepts and economic analysis to
the problems of Rational managerial decisions
 Integral part of Managerial Economics which seeks to predict and explain economic
behavior. Economic theory
 What is the main problem of economics? Scarcity
 What is the solution in the main problem of Economics? Proper allocation of resources
 It is the application of economic theory and the tools of analysis of decision science to
examine how an organization can achieve its aim or objective efficiently. Managerial
Economics
 Father of economics. Adam Smith
 Who said that the “application of economic theory and the tools of analysis of decision
science to examine how an organization can achieve its aim or objective efficiently.
Salvatore
 It seeks to achieve a goal subject to some limitation. Management decision problems
 It seeks to predict and explain economic behavior. Economic theory
 Management decision problems exist when an organization of any type tries to achieve
some goal subject to some Limitations
 It is an “Application of economic theory and decision science tools to achieve
managerial decision problems”. Managerial economics
 What is an aim of the firm? Maximize sales
 It is used to express the models in equation form. Mathematical economics
 It utilizes the tools of statistics, specifically regression analysis, to data and estimate the
model and make forecasts. Econometrics
 It lies at the core of the most management problems. Decision making
 The marketing department can help reduce the cost associated with a given level of
output by promoting off-season sales and influencing clients order size. True
 Basic model of business. Theory of the firm
 What is the primary objectives of the firm? Maximize its wealth
 The department that has the primary responsibility is for acquiring capital. Finance
 The production department can increase sales by improving quality and developing new
products. True
 Finance department can provide relevant and timely information on sales and cost. True
 Another term for budget line. Consumption possibilities
 TR depends on sales which is the responsibility of the? Marketing
 Qd>Qs. Shortage
 Qd<Qs. Surplus
 When the demand curve and supply curve intersect. Equilibrium

 It refers to the entire relationship between the quantity of product that the buyers wish
to purchase per period time and the price of that products. Demand
 It is a tabular presentation of the demand and price. Demand schedule
 It is a calculation of the way how prices, costumers expectations and substitute products
are reflected in the demand for a good or services. Demand function
 Supply can be analyze with the aid of table, graph, or function reflecting the relationship
of quantity demanded and price or quantity demanded and other factors affecting it.
False
 As the price of a particular product increases the consumer will tend to switch other
substitute products which will lead to a reduction on demand of a particular product.
Substitution Effect
 As the price of a particular product increases the purchasing power of the income
reduce which lead also to the reduction on quantity demanded of the product. Income
Effect
 Both demand curve and function are tools which present the relationship of price and or
non-price factors and quantity demanded. True
 It estimates the future demand of the product. Demand forecasting
 In the law of demand. If the price will increases. What happen to the quantity
demanded? Decrease
 In the law of demand. If the price will decreases. What happen to the quantity
demanded? Increase
 In the law of supply. If the price will decreases. What happen to the quantity supply?
Decreases
 In the law of supply. If the price will increases. What happen to the quantity supply?
Increases
 It is the method that demand is estimated on basis of analysis of past data. Trend
Projection
 This method, a list of potential buyers would be drawn and each buyer will be
approached and asked about their buying plans. Consumer Interview
 This method, may be conducted in a complete enumeration, sample survey or end-use
method. Consumer Interview
 It is the method that combine the economic theory and statistical techniques of
estimation. Regression and Correlation
 This method is applying binomial expansion method. Extrapolation
 In this method a panel is chosen to give suggestions in solving the problems in hand.
Delphi method
 In this method panel members are separated from each other and give their views in an
anonymous manner. Delphi method
 This is based on the assumption that the rate of change in demand in the past has been
uniform. Trend projection
 It also called the complete system approach to forecasting. Simultaneous Equation
 This method few consumers are selected and their responses on the probable demand
is collected. Survey Method
 The demand of the sample so ascertained is then magnified to generate the total
demand of all the consumer for that commodity in the forecast period. Survey Method
 This is the most sophisticated econometrics method of forecasting. Simultaneous
Equation
 It refers to the ability and willingness of the producer to sell at a given price on a
particular period of time. Supply
 Consumer’s reactions on the new products are found out indirectly with the help of
specialized dealers. Vicarious Approach
 The demand is estimated by supplying new product in a sample market and analyzing
the immediate response on that product in the market. Sales Experience Approach
 In this method, the demand for new product is estimated on the basis of existing
product. Evolutionary Approach
 The demand for the new product is analyzed as substitute for the existing product.
Substitute Approach
 The basis of the growth of an established product, the demand for the new product is .
Estimated
 This goods which satisfies aristocratic desire like diamonds, antique items, rare
paintings, etc. where prices of these items increases the quantity demanded of wealthy
individual will also increase. Veblem Goods
 If there will be an increase of complementary product what will happen to the quantity
demanded. Decrease
 If there will be an increase of population what will happen to the quantity demanded.
Increase
 If there will be an increase of birth rate what will happen to the quantity demanded.
Increase
 If there will be an increase of mortality rate what will happen to the quantity demanded.
Decrease
 If there will be an increase of taste and preferences what will happen to the quantity
demanded. Increase
 If there will be an increase of migration rate what will happen to the quantity
demanded. Decrease
 If there will be an increase of rice per kilo next month what will happen to the quantity
demanded. Increase
 If there will be an increase of taste and preferences what will happen to the quantity
demanded. Increase
 If there will be an increase of sellers in the market what will happen to the quantity
supplied. Increase
 If there will be an introduction of new machines in production what will happen to the
quantity supplied. Increase
Identify what business factor is given that will be used for the questions for evaluation.

 Unreliable forecast? Inadequate cash flow?


Issues and risks
 Where is the market demand? What is the target market? Is it generic or a niche?
Market opportunity
 Is the company able to produce product and supply required aftercare support?
Product or service
At what stage of entrepreneurial process: steering the organization towards its goals and
determining the key variables for success. Stage 3
This is when one perceives his talent and abilities as a set that can be improved. Growth
mind set
It emphasizes that entrepreneur shifts economic resources out of an area of lower and into
an area of higher productivity and greater yield. Creates value
This type of person will acknowledge that he is not good in something in order to avoid
challenges or failure. Fixed mind set
Who said that a mindset is a habit that requires practice. Gupta
Who said that the function of entrepreneurs is to reform of revolutionize the pattern of
production by exploiting an invention or more generally an untried technological possibility
for producing a new commodity or producing an old one in a new way by opening up new
source of supply of materials or a new outlet for products by reorganizing an industry and
so on. Joseph Schumpeter

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