E303Lect2s06 - January 20, 2006 Lecture 2 Reading; Today,...

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January 20, 2006 Reading; Today, Baye, Ch. 1 pp 6 -19 Lecture 2 Monday: Ch. 1, pp. 19-27 Problems: Handout sheet 1 REVIEW___________________________________________________: I. Chapter 1. The Fundamentals of Managerial Economics A. Definition of Topic . 1. Economics 2. Managerial Decisions B. Components of Effective Decision Making 1. Identify Goals and Constraints : 2. Recognize the Nature and Social Role of Profits: a. Defining Economic Profits Economic profits differ from Accounting profits. . Good decision-making involves the maximization of economic profits. Preview__________________________________________________________ b. Understanding the Social Role of Profits. 3. Understanding Incentives. .Compensation and the structure of organizations affects importantly organizations. a. Organizational Incentives b. Incentives for Motivating Individuals 4. Understand Markets. Market forces represent a series of rivalries. In any problem, you must appreciate your position relative to other agents. 5. Recognize the Time Value of Money 6. Appreciate Marginal Analysis Marginal decisions are an easy way to optimize totals. Calculus is just a formal expression of marginal analysis. Lecture_____________________________________________________________ b) The social role of profits. The 1980’s are popularly called “the decade of greed.” A popular depiction of attitudes in the 80’s was the film “Wall Street” where Michael Douglas gives a lecture to shareholders extolling the virtues of selfishness. This is passe, of course, but, even at its height, it was a caricature of the role of profits in society. Profits serve a valuable social function if certain assumptions regarding competitive performance are satisfied. These assumptions include: -many buyers and sellers . This is referred to as the structural assumption .
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This note was uploaded on 04/12/2010 for the course ECON 303 taught by Professor Shrestha during the Fall '08 term at VCU.

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E303Lect2s06 - January 20, 2006 Lecture 2 Reading; Today,...

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