Managerial_Package 1_Introduction (Chapters 1-4).pdf - Rutgers Business School Department of Finance Economics Managerial Economic Analysis Professor

Managerial_Package 1_Introduction (Chapters 1-4).pdf -...

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1 Managerial Economic Analysis Professor Parul Jain Rutgers Business School Department of Finance & Economics Package 1 – Introduction (Chapters 1-4) Rutgers Business School Department of Finance & Economics I-2 Introduction The manager Economics Managerial economics defined Economics of Effective Management Identifying goals and constraints Recognize the nature and importance of profits Understand incentives Understand markets Recognize the time value of money Use marginal analysis Learning managerial economics Preliminaries I-3 The Manager A person who directs resources to achieve a stated goal. Directs the efforts of others. Purchases inputs used in the production of the firm’s output. Directs the product price or quality decisions. 1-3
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2 I-4 Economics The science of making decisions in the presence of scarce resources . Resources are anything used to produce a good or service, or achieve a goal. Decisions are important because scarcity implies trade-offs. 1-4 I-5 The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal. Should a firm purchase components – like disk drives and chips – from other manufacturers or produce them within the firm? Should the firm specialize in making one type of computer or produce several different types? How many computers should the firm produce, and at what price should you sell them? Managerial Economics Defined I-6 Basic principles comprising effective management: Identify goals and constraints. Recognize the nature and importance of profits. Understand incentives. Understand markets. Recognize the time value of money. Use marginal analysis. Economics of Effective Management
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