MANAGERIAL ECONOMICS – BMME5103 MAY 2013

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Managerial Economics – BMME5103 Instructor: DR. Nabil Al Hazmi USTY ID : 201312239 Program: MBA

Assignment

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Student Name: Sufian Mohammed Abdo Ali Al Ba’adani

Question 1

a) Write a brief definition of economics. Elaborate the conditions that give rise to this definition.

Answer: It is the social science that studies the production ,distribution and consumption of goods and services and is concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants and needs. Economic wants are many and different. People look for many goods and services to satisfy their wants. Society uses resources to produce goods and services that fulfill these wants. Unfortunately, the resources are not sufficient to satisfy those wants. [1]

b) Analyze the THREE interrelated features of the economic perspective? Answer: 1) Scarcity: The first interrelated feature of the economic perspective is the scarcity of resources that forces individuals and society to make decision among alternatives . Human and property resources are scarce, so choices must be made about how best to utilize those little resources. 2) Allocation decision: economics assumes that any decision-making is based on “rational self-interest.” People make rational decisions to achieve the maximum satisfaction of a goal. customers try to get the highest value for their payments. Workers try to get the best job given their skills and abilities. companies try to maximize their profitability.

3) Opportunity cost: economics focuses on marginal analysis when making an economic decision. The marginal or “additional” costs from an economic choice are weighed against the additional benefit. If the marginal benefit outweighs the marginal costs, then a decision will be made to take the beneficial action. If the marginal cost