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
