ECONOMICS FOR MANAGERS

ECONOMICS  FOR MANAGERS

Ø  Economics and managerial decision making

Economics : The study of the behavior of human beings in producing, distributing and consuming material goods and services in a world of scarce resources

Management : The science of organizing and allocating a firm’s scarce resources to achieve its desired objectives

Managerial economics : The use of economic analysis to make business decisions involving the best use (allocation) of an organization’s scarce resources

Management science: linear programming, regression analysis, forecasting

Strategy: types of competition, structure-conduct-performance analysis

Managerial accounting: relevant cost, breakeven analysis, incremental cost analysis, opportunity cost

Ø  Questions that managers must answer:

o   What are the economic conditions in our particular market?

§   market structure?

§   supply and demand?

§   technology?

§  government regulations?

§   international dimensions?

§   future conditions?

§   macroeconomic factors?

o   How can we maintain a competitive advantage over other firms?

§   cost-leader?

§   product differentiation?

§   market niche?

§   outsourcing, alliances, mergers?

§   international perspective?

Ø  Economics of a business

The economics of a business refers to the key factors that affect the firm’s ability to earn an acceptable rate of return on its owners’ investment

The most important of these factors are

·         competition

·         technology

·         customers

Ø  Review of economic terms

Microeconomics is the study of individual consumers and producers in specific markets, especially: supply and demand, pricing of output, production process, cost structure ,distribution of income

 Macroeconomics is the study of the aggregate economy, especially: national output (GDP), unemployment, inflation, fiscal and monetary policies, trade and finance among nations

Resources are inputs (factors) of production, notably: land ,labor ,capital entrepreneurship

Scarcity is the condition in which resources are not available to satisfy all the needs and wants of a specified group of people

Opportunity cost is the amount (or subjective value) that must be sacrificed in choosing one activity over the next best alternative

Allocation decisions must be made because of scarcity. Three choices:

                 What should be produced?

                  How should it be produced?

                   For whom should be produced?

Entrepreneurship is the willingness to take certain risks in the pursuit of goals

Management is the ability to organize resources and administer tasks to achieve objectives