Scribd
Upload
185 views28 pages

Chapter 1-2 - ME-1

CHAPTER II: The Elements of Demand discusses key concepts related to demand including: 1. Defining demand as the quantity of a good/service people are willing and able to buy at various prices. 2. Explaining the law of demand which states that quantity demanded is inversely related to price, ceteris paribus. 3. Introducing demand curves which graphically show the inverse relationship between price and quantity demanded. 4. Estimating demand functions using regression analysis of time-series data to mathematically express demand.

Uploaded by

Pia Chan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
185 views28 pages

Chapter 1-2 - ME-1

CHAPTER II: The Elements of Demand discusses key concepts related to demand including: 1. Defining demand as the quantity of a good/service people are willing and able to buy at various prices. 2. Explaining the law of demand which states that quantity demanded is inversely related to price, ceteris paribus. 3. Introducing demand curves which graphically show the inverse relationship between price and quantity demanded. 4. Estimating demand functions using regression analysis of time-series data to mathematically express demand.

Uploaded by

Pia Chan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 28

MANAGERIAL ECONOMICS

Rulina B. Viloria, MSE


Dr. Frederick A. Halcon
Edilberto B. Viray, Jr. MAE
Ma. Jesusa Avila – Bato, MAE
MIXED-UP WORDS

1. AAAEIMNGRL OOIECNMCS
2. SECCOIRNTOEM
3. NOISICED-AGMKIN OLMDE
4. TPIRFO
5. EECRTS SUBIRAP
6. YTOPPINORTU SOTC
7. IIOOOEMCRCNMCS
8. YCNEICIFFE
9. DMISUIRBILIUQE
10. NOITAVOINN
ANSWERS

1. MANAGERIAL ECONOMICS
2. ECONOMETRICS
3. DECISION-MAKING MODEL
4. PROFIT
5. CETERIS PARIBUS
6. OPPORTUNITY COST
7. MICROECONOMICS
8. EFFICIENCY
9. DISEQUILIBRIUM
10. INNOVATION
Chapter I
Fundamentals of
Managerial
Economics
Learning Objectives:

After reading and studying this chapter, the reader


should be able to:
1.Review the basics of Economics;
2.Define Managerial Economics;
3.Determine the nature of Managerial Economics;
4.Identify the relationship of Managerial Economics
to Economics and Mathematical Economics;
5.Describe the Theory of the Firm; and
6.Enlighten on the Importance of Profit.
CHAPTER I: Fundamentals of Managerial Economics

• The Basics of Economics


• Defining Managerial • The Theory of the Firm
Economics • Decision-making Model
• Managerial Economics • Role of the Profit
on Econometrics and • Profit Maximization
Mathematical Economics
• Managerial Economics
and other Business
Disciplines
CHAPTER I: Fundamentals of Managerial Economics

Basics of Economics

▫ Economics
▫ Microeconomics vs Macroeconomics
▫ Ceteris Paribus
▫ Basic Economics Questions
▫ Efficiency, Equity and Effectiveness
▫ Opportunity Cost
▫ Factors of Production
CHAPTER I: Fundamentals of Managerial Economics

Defining Managerial Economics

Managerial economics is defined as the


utilization of managerial skills in the business by
applying economic theories and concepts to
maintain efficiency in costing and production;
and effectiveness on every decision making by
the firms to fully maximize their profits.
CHAPTER I: Fundamentals of Managerial Economics

Managerial Economics on Econometrics and


Mathematical Economics

The utilization of mathematical economics to managerial


economics is essential as it is used to formalize (express in
equational form) the economic models postulated by economic
theory to firmly identify the proper solution to a managerial
decision problem. And on the other hand, econometrics used in
managerial economics simply is a statistical tool (particularly
regression analysis) to real-world data to estimate the models
postulated by economic theory; also used in forecasting.
CHAPTER I: Fundamentals of Managerial Economics

Managerial Economics and other Business


Disciplines

□ Marketing
□ Finance
□ managerial science
□ Strategic management
□ managerial accounting
CHAPTER I: Fundamentals of Managerial Economics

The Theory of the Firm

• Earning Profit
 It is the difference between the income an entrepreneur
receives from the sale of his goods and services and the
expenses he incurs to produce them; (income – expenses).
• Increasing its own Value as an Economic Activity
 A firm always strives for its growth and stability in the
economy
• Improving the Quality of Life in the Community
 A business entity provides job or employment opportunities to
the economy.
CHAPTER I: Fundamentals of Managerial Economics

Decision-making Model

The decision making of every manager is


considered as the heart and soul of any enterprise.
Its success and failures depends on how the
manager makes a sound decision when it comes to
utilizing his available resources (capital,
technology, human etc.) on the business.
CHAPTER I: Fundamentals of Managerial Economics

Role of the Profit

▫ Risk-Bearing Theory of Profit


▫ Temporary Disequilibrium Theory of Profit 
▫ Monopoly Theory of Profit 
▫ Innovation Theory of Profit
▫ Managerial Efficiency Theory of Profit
CHAPTER I: Fundamentals of Managerial Economics

Profit Maximization

▫ The Shareholder Wealth-Maximization Model of the Firm


▫ Goals in Public Sector and Non-Profitable Enterprises 
▫ Non-Profitable Objectives
▫ Understanding the Markets
▫ Consumer – Producer Rivalry
▫ Consumer – Consumer Rivalry 
▫ Producer – Producer Rivalry
▫ Government and the Market
CHAPTER I: Fundamentals of Managerial Economics

End of Chapter I
Chapter II
The Elements
of Demand
Learning Objectives:

After reading and studying this chapter, the reader


should be able to:
1.Review the basics of demand;
2.Discuss the various special cases of demand curve;
3.Define scatterplots;
4.Estimate the demand function using simple linear regression; and
5.Determine elasticity and demand functions.
Chapter II: The Elements of Demand
Chapter II: The Elements of Demand

Demand

▫ It refers to the quantity of a good/service that


people are ready to buy at given prices within a
given time period, when other factors are held
constant. Therefore, demand can be represented
as a schedule or a table that relates prices and
quantity demanded.
 
Chapter II: The Elements of Demand

Law of Demand

▫ The law of demand simply states that the quantity


of a good bought is inversely related to the good’s
price, all others being equal or constant (ceteris
paribus).
Chapter II: The Elements of Demand

Demand Curve

▫ The demand curve shows the relationship between


price and the quantity of a good bought. It is
usually downward sloping which depicts the
inverse relationship between price and quantity.
Chapter II: The Elements of Demand

Special Cases of Demand Curve

▫ A demand curve could also be either horizontal or


vertical. Horizontal demand curves imply that
price is constant regardless of quantity demanded
while vertical demand curves imply that quantity
demanded regardless of price.
Chapter II: The Elements of Demand

Demand Function

▫ The demand function is a mathematical


equation that expresses the quantity
demanded with the good’s own price, the
prices of related goods, income level,
advertising expenditure and the like 
Chapter II: The Elements of Demand

Scatterplots

▫ Scatterplots are also known as scattergrams


or scatterdiagrams. These are graphical
representations of actual data points plotted on a
Cartesian coordinate system. Through the use of
scatter plots, one can visually determine whether
the relationship between two variables, x and y,
can be be estimated using a linear relationship.
Chapter II: The Elements of Demand

Estimating Demand Functions using Simple


Linear Regression

▫ For this lesson, we will try to estimate a demand


function given time-series data. A data set is said
to be in time series when data points are recorded
in regular intervals. Examples of data in time
series are daily sales records of a company, annual
gross domestic product of the Philippines,
quarterly inflation rates and the like.
Chapter II: The Elements of Demand

Linear Regression using Microsoft Excel

▫ Regression analysis can also be performed using


Microsoft Excel using the Data Analysis feature.
Programs such as MS Excel, SPSS (Statistical
Package for the Social Sciences), Eviews, Stata are
the commonly used software packages used in
analyzing economic data.
Chapter II: The Elements of Demand

Elasticity and Demand Functions

▫ Elasticity is a measure of the degree of responsiveness


or sensitivity of one variable when another variable
changes. In economics, particularly in the
investigation of demand functions, a very common
elasticity usually discussed is the own-price
elasticity of demand. This gives the percentage
change in quantity demanded when the price of the
commodity changes by one percent.
Chapter II: The Elements of Demand

End of Chapter II

You might also like