Managerial-Economics-Lecture-Slides.ppt - Managerial...

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Managerial Economics Nature and Scope Ferdinand E. Ventura, CPA, MBA Teacher
Nature and Scope How is Managerial Economics Useful?
Nature and Scope Evaluating Choice Alternatives 1. Recognition of economic forces that affect organizations 2. E conomic consequences of managerial behavior 3. Links economic concepts and quantitative methods to develop vital tools for DECISION MAKING
Nature and Scope Evaluating Choice Alternatives 1. Recognition of economic forces that affect organizations Meet short-run objectives Pricing Strategies e.g. behavior of demand & supplies Production Strategies
Nature and Scope Evaluating Choice Alternatives 2. Economic consequences of managerial behavior Maximize Profits Production Rules Marketing Rules
Nature and Scope Evaluating Choice Alternatives 3. Links economic concepts and quantitative methods to develop vital tools for DECISION MAKING Simplifies complexity Use of tools and concepts to arrive at a set of operating rules efficient use of scarce human & capital resources
Nature and Scope Making the Best Decision Establish the appropriate decision rules Understand the economic environment Comprehensive application of economic theory & methodology Objective: Profit maximization
Nature and Scope Making the Best Decision Internal – business’ capacity External – political, competition M icroeconomics – individual segments of the economy i.e. consumers, workers, owners of resources, individual firms, industries & markets for goods & services
Nature and Scope Making the Best Decision Business practices or tactics – routine business decisions to earn the greatest profit under prevailing market conditions Industrial organization – focus on the behavior and structure of firms & industries Strategic decisions – business actions taken to alter market conditions and behavior of rivals to increase or protect firm’s profits
Nature and Scope
Nature and Scope Managerial Application 1.1 Business Ethics o Reaction o Site other examples
Nature and Scope The Theory of the Firm It is a business model that is useful for producing and distributing goods and services. Series of contractual relationships Specifies the rights and responsibilities of various parties Primary goal is profit maximization
Nature and Scope The Theory of the Firm Suppliers Society Management FIRM Customers Employees Investors
Nature and Scope The Theory of the Firm Profit Maximization involves Before Short-run profits Today Long-term expected value maximization encompassing Uncertainty (risk rate) Time value of money VALUE OF THE FIRM
Nature and Scope The Theory of the Firm CAPITALISM Capitalism Voluntary transactions between individuals and firms create wealth. Art of business Consists of identifying assets in low-valued uses & devising ways to profitably move them to higher valued ones Wealth – objective of a business It is created when assets move from lower to higher-valued assets

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