Managerial Economics Week 1

Property Rights
The property right to own and use property was historically understood to be critical to the maintenance of a free society. No property rights mean there is no any collateral for loans, no mobility and no investment. The property right is the foundation of the most of the economic system, if without the property right the whole economic system will fall apart. This is why are property right so important in creating wealth, because no property right, then no modern economic system. As a result, the world we familiar with will totally different.
Goal Alignment at a Small Manufacturing Company
First, let see how much will this manager get out of this job. If everything is going well, he will get 75% of $150,000 which is $112,500 and add flat salary. And 10% of profit over $150,000, let say the profit increase $50,000 each year in next five year, then this manager will get $75,000 total after five years. But now the average annual profit will be $300,000. So now the Vice President will pay $1,350,000. And let suppose the flat salary is $10,000. Then the Vice president will get $1,137,500 in this way. So if thing going like this, there would be a big chance that aligns the incentives of the new vice president with the goals of the owners.
Rent Control
Figure out how to profitably consummate the unconsummated wealth-creating transaction created by rent control.
No matter the potential tenants or potential landlords, both sides are willing to accept a higher price than the rent-controlled price. This is where the unconsummated wealth-creating transaction created by rent control. One way of circumventing the price ceiling is to rent the apartment through the rental agent, which will increase the opportunity cost of the rental to the tenants. So tenants will have more second thinking, and make better decision.
Price