...This page intentionally left blank Managerial Economics Managerial economics, meaning the application of economic methods in the managerial decision-making process, is a fundamental part of any business or management course. This textbook covers all the main aspects of managerial economics: the theory of the firm; demand theory and estimation; production and cost theory and estimation; market structure and pricing; game theory; investment analysis and government policy. It includes numerous and extensive case studies, as well as review questions and problem-solving sections at the end of each chapter. Nick Wilkinson adopts a user-friendly problem-solving approach which takes the reader in gradual steps from simple problems through increasingly difficult material to complex case studies, providing an understanding of how the relevant principles can be applied to real-life situations involving managerial decision-making. This book will be invaluable to business and economics students at both undergraduate and graduate levels who have a basic training in calculus and quantitative methods. N I C K W I L K I N S O N is Associate Professor in Economics at Richmond, The American International University in London. He has taught business and economics in various international institutions in the UK and USA, as well as working in business management in both countries. Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge...
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...Managerial Economics Output No. 1 With regard to a hospital, a state university, and a museum, define (a) a possible primary aim, or goal, of each, (b) some of the constraints under which they operate, and (c) the relationship of (a) and (b) to the study of managerial economics. |Name of Firm |Primary Goals |Possible Constraints | | | | | |San Pedro Hospital |We, the San Pedro Hospital community of health workers commit|Financial constraints | | |to: |Hospital building capacity | | |Provide the best quality and compassionate health care |Availability of hospital devices to | | |services in satisfying all individuals with respect and |perform various tests. | | |reverence of their person; |Availability of medicine for diagnosed | | |Deliver quality satisfying services expected of a training |illnesses | | |health care institution; and ...
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...Subject: Managerial Economics and Finance Proffecer name: Pudasaini Assignment Number: 1 Submitted by: Rajendra Sondarva Date: 07/22/2015 TABLE OF CONTENTS INTRODUCTION ................................................................................ 01 ABSTRACT ...................................................................................02 ASSIGNMENT ...................................................................................03 REFERENCE ...................................................................................08 INRODUCTION 1] Description managerial economics relies on microeconomics and industrial organization to analyze business practices and design business strategies 2] Description the difference between price-taking and price-setting firms. ABSTRACT Overview of industrial organisation and micro economics related to managerial economics and difference between price taking and price setting. ASSIGNMENT 1. Why managerial economics...
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...alternative over the next best alternative. [pic]True[pic]False Question7 Personal Disposable income = Private income - Saving of private corporate sector net of retained earnings of foreign companies - Corporation tax. [pic]True[pic]False Question8 Implicit costs refer to the value of inputs owned and used by a firm. [pic]True[pic]False Question9 The theory of the firm holds that the primary goal of a firm is to maximize the discounted present value of the positive difference between the firm's total revenue and the firm's total cost or to minimize the present value of the negative difference between the firm's total revenue and total cost. [pic]True[pic]False Question10 The single most important element in managerial economics is the microeconomic theory of the firm. [pic]True[pic]False Question11 Net Domestic Product at factor cost = Net domestic product at market prices - indirect taxes + Subsides. [pic]True[pic]False Question12 When the price of a product rises, individuals and firms can rearrange their activities in order to supply more of that product to the market, substituting production of the product for the production of other goods. Is this statement true or false? [pic]True[pic]False...
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...Economics for Managers, 11th Edition by McGuigan, Moyer, & Harris PowerPoint Lecture Slides prepared by Richard D. Marcus University of Wisconsin - Milwaukee 2008 Thomson * South-Western Slide 1 Chapter 1 Introduction & Goals of the Firm » Introduction » » » » » Structure of Decision Models Profit’s Role Agency Problems & Solutions Not-for-Profit Organizations Why Corporations Have Succeeded Over Other Organizational Forms Slide 2 What is Managerial Economics? Integrates and applies microeconomic theory and methods to decision making problems faced by private, public, and not-for-profit organizations. Managerial economics deals with microeconomic reasoning on real world problems such as pricing decisions, selecting the best strategy in different competitive environments, and making efficient choices. Slide 3 To Expand Capacity or Not? • Should Toyota expand its capacity? In part, it must consider current and future demand and what other firms are likely to do. • Capacity for making cars is a long term project, so Toyota should think in terms of the present value (PV) of future profits. • Objective Function: » Max PV of profits {S1, S2} » S1 could be expand capacity and S2 not to expand yet capacity at this time. • Decision Rule: » Choose S1 if PV {Profits of S1 } > PV { Profits of S2 } » Choose S2 if PV { Profits of S1 } < PV { Profits of S2 } » If equal profits, then flip a coin Slide 4 The Decision-Making Process (Figure 1.2)...
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...Department of Managerial Economics and Decision Sciences HOMEWORK: REVENUE MANAGEMENT BY A RENTAL CAR COMPANY:1 You are a consultant hired by a major national rental car company that is seeking to improve its pricing strategy. In particular, it is considering adopting a strategy of customized pricing tailored to the underlying micro-markets that it might face. In the rental car business (as in the hotel and resort business), price customization is known as revenue management. As a test case, your client is considering a pricing experiment at Lambert Airport in St. Louis, Missouri, a location at which your client has dominant market share and thus can safely ignore possible reactions of competitors. Careful market research has revealed that the St. Louis market is composed of two micromarkets. The first comprises business travelers; the second comprises vacation travelers. The demand curves for these two micro-markets are given below: Micro-market Business travelers Vacation travelers Demand curve equation Q1= 3,600 – 20P Q2= 3,000 – 30P In the table above, P is the daily rental rate, while Q1 and Q2 are the numbers of vehicles rented per day by business travelers and vacation travelers, respectively. Like airlines, the rental car business is one in which the marginal cost of serving an extra customer is nearly zero. For this reason, throughout this exercise, we will assume that your client’s MC = 0. (Of course, your client has fixed costs, but as an astute practitioner...
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...Long-term Investment Decisions Introduction Investment is the process of creating or purchasing possessions with the aim of gaining benefits in future. Therefore, making long-term objectives or decisions is necessary for any business that relates to investment. For the organization to yield returns and gain good performance in the market it must make good use of the financial resources available to acquire buildings, machines, or other assets that will enable smooth operation within the organization for a long period. A planning that the management needs to consider involves accessing many issues that face the business, and finally decide which issue to invest on depending on its urgency in the business. The issues that are encountered in the business vary depending on attitude, circumstances to risk, and particular age. Therefore, the management must take time to think about the issues before making decisions to avoid possibly costly mistakes. A Plan Used By Managers When Selecting Pricing Strategies In Order To Attain Inelastic In Their Products. It’s very crucial for managers to price their product in order to attain the potential or current customers in the market. As a result, the decision made by the management will determine the future progress or success of the business. For that reason, major strategies like employing pricing, safeguarding inelasticity in products, and many other strategies need to be established to ensure that products are retained by customers...
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...Running Header: Consumption Patterns and Definitions Economics Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. In reference to economics coordination refers to how three central problems facing any economy are solved. They are: 1. What, and how much, to produce. 2. How to produce it. 3. For whom to produce it. Microeconomics The economic theory is divided into two parts microeconomics and macroeconomics. Microeconomics is the study of how individual choice is influenced by economic forces. Some studies include pricing policies of firms, households’ decisions on what to buy, and how markets allocate resources among alternative ends (McCarthy & Perreault, 2004). Law of Supply At higher relative prices, the quantity supplied of a good will increase; at lower relative prices, smaller quantities will be supplied (Unknown, 2002). Quantity supplied rises as price rise, other things constant. Or quantity supplied falls as price falls, other things constant. Price determines quantity supplied just as it determines quantity demanded (McCarthy & Perreault, 2004). Law of Demand People purchase more of any particular good or service as its relative price rises. Demand is the willingness to pay. Quantity demanded rises as price falls, other things constant. Or quantity demanded falls as prices rises, other things...
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...1. Coffee bun market Research and certified by economists and scholars, market structure has 4 types of market. It comprises of perfect, monopolistic, oligopoly and monopoly. Each market has its own characteristics and features which the businessman are required to master so that they are able to apply the business strategy sophisticatedly. First of all, it is perfect competition. In this market type, there are a lot of small firms and customers. Thus, both sides do not have any effect on price. Besides, the products sold in this market are identical to the sellers. And because product is homogenous and consumers do not care the brand name, it leads to a strong competition among the sellers to gain the most attention from consumers. Moreover, the entry of market is free. There is almost no object to prevent new firms from entering the market. So it is very easy for them to come in and compete with the existing firms. And if they feel the profits from the business not as much as they want, they also leave the market without prevention. One more thing is that the information about price and products in the market are observed and updated well by both sellers and buyers, so they know which suppliers are offering same products with lower price than another. For example, selling cabbage belongs to perfect competition where the sellers and buyers update their own information about price daily. And the buyer can choose any seller which they provide the lower price than another in...
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...1) Easy Living microwaveable foods has had an increase in demand due to the large amount of buyers and sellers in the market. Because of the large numbers of buyers and sellers selling the same product. This market is perfectly competitive. 2) In assignment 1, it was also stated that the market structure competitive and that the equilibrium price was to be determined by setting QD equal to QS. In a perfectly competitive market there are a large number of buyers and sellers. The products sold in this market are perfectly homogeneous. Examples of perfect competition are vegetable market, agricultural market, market for cereals etc. The main characteristics of perfect competition are: a) Large number of buyers and sellers b) Homogeneous product c) No entry barriers d) No transaction cost e) Perfect information A firm under perfect competition cannot affect the market price. They act as mere price takers. They take market price as given and sell any amount of quantity as per its capacity at that price. If a firm increases its price, consumers will then buy the product from another firm. Therefore a perfect competitive firm always sets its price equal to its MC. Suppose in the short run the firm is earning a supernormal profit. As a result, other firms will get attracted and will enter the industry. This will increase the industry output and market price will fall. This process will till the entire supernormal profit is exhausted and each firm ends up...
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...Strayer University Assignment 2: Operations Decisions Submitted by: Name ECO 550 Dr. Lundondo Mumeka Date: 14 Aug 2014 Today, life has become very fast. In today’s fast living world, the value of time has increased a lot. Most of the people are working and hardly find any time to cook for themselves. In this busy schedule, the introduction of low calorie microwavable food has lives of people much more easier. These products are easily consumable and hence have become very popular. As discussed in assignment 1, the market structure (or selling environment) was perfectly competitive. In a perfectly competitive market there are a large number of buyers and sellers. The products sold in this market are perfectly homogeneous. Examples of perfect competition are vegetable market, market for cereals etc. In a real world situation, there are many sellers of low calorie microwavable food. If we observe the demand side, we can also find a large number of buyers in the market. With large number of buyers and sellers, if we examine the nature of the product, then we can see that the products are almost homogeneous. The main characteristics of perfect competition are: i. Many buyers and sellers ii. Free entry and exit iii. Information is perfect iv. Homogeneous product Now, firms under perfect competition have no market power and hence cannot affect the market price. They are bound to sell at the ongoing market price. But recently, it has been observed that the characteristics...
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...Shavon L. Toles Strayer University Managerial Economics and Globalization Assignment #2 Dr. Camille Castorina May 18, 2015 There are many all natural hair care products available in the market today. With the rise in income people can afford an easier lifestyle therefore there has been a change in the haircare style of people. People now use all natural ingredients in place of traditional hair care methods. With rise in these all natural ingredient, the rise in all natural hair care products also occurred. With so many varieties and products available one can easily target upon a healthy choice of hair care products. A healthier option of hair care products is one which compromises of a good source of nutrients to your hair. Some of the competitors’ options are manufactured by SheaMoisture and Au Naturale. Both of them are the competitors in the market of all natural hair are products. Consumer behavior is dependent upon the gender, age, educational, social and economic background of the people. When we have a look at the consumer behavior of the all natural hair care industry we should first study the target consumers. Our target would be on the buying and purchasing power of the consumer. Our sales would also be determined on the sale of all natural ingredients. The more number of all natural ingredients users there will be more demand for all natural hair products. The taste and educational background of the consumers would also affect the sales. Since the...
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...Long-Term Investment Decisions Tiffant Lewis Strayer University Dr. Xiaodong Wu ECO 550 March 9, 2014 Introduction One of the most important long term decisions for any business relates to investment. Investment is the purchase or creation of assets with the objective of making gains in the future. Typically investment involves using financial resources to purchase a machine/building or other asset, which will then yield returns to an organization over a period of time. Planning investments involves thinking about a range of issues that have a bearing on where you ultimately decide to put your money. These issues will vary according to your particular age, circumstances and attitude to risk, and thinking about them carefully before you start making commitments will help you avoid some potentially costly mistakes. 1. Outline a plan that managers in the low-calorie microwaveable food company could follow when selecting pricing strategies for making their products as inelastic as possible. Provide a rationale for your response. Pricing the product to reach out the current and potential customers is crucial for the managers. It is their understanding and decisions that are going to determine the success of any business. A major strategy that ensures that customers are retained with the product is to make the product inelastic employing pricing and other strategies. However, before we explain the strategies to make low-calorie microwavable food inelastic, we must understand...
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...Eco 550 Long-Term Investment Decisions Tiffant Lewis Strayer University Dr. Xiaodong Wu ECO 550 March 9, 2014 Introduction One of the most important long term decisions for any business relates to investment. Investment is the purchase or creation of assets with the objective of making gains in the future. Typically investment involves using financial resources to purchase a machine/building or other asset, which will then yield returns to an organization over a period of time. Planning investments involves thinking about a range of issues that have a bearing on where you ultimately decide to put your money. These issues will vary according to your particular age, circumstances and attitude to risk, and thinking about them carefully before you start making commitments will help you avoid some potentially costly mistakes. 1. Outline a plan that managers in the low-calorie microwaveable food company could follow when selecting pricing strategies for making their products as inelastic as possible. Provide a rationale for your response. Pricing the product to reach out the current and potential customers is crucial for the managers. It is their understanding and decisions that are going to determine the success of any business. A major strategy that ensures that customers are retained with the product is to make the product inelastic employing pricing and other strategies. However, before we explain the strategies to make low-calorie microwavable food inelastic...
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...Executive summary Advertisement campaign in relation to neoclassical theory of consumer, understanding what consumer behavior in terms of their wants and needs, not forgetting their personality, attitude, perception, is not only important to marketers whose main goal is to make profit but also to the government and its various regulatory agencies and the whole society. Such a theory is usually based on a consumer image as one of the highest rational decision maker that widely seeks to maximize customer satisfaction by way of providing an informed and reasoned analysis of utility and value. The consumer behavior is known to create strong assumptions which are based on both computational and informational bases of consumer theory. Contents 1.0 Description of the advertisement 3 2.0 Market Group 4 3.0 Problem recognition 5 4.0 Neoclassical consumer theory 6 5.0 Application of neoclassical theory of consumer 8 6.0 Conclusion 9 7.0 Work cited 10 Consumer Behavior 1.0 Description of the advertisement The advertising campaign is for an airline company QANTAS that has its base in Australia. It has a picture of a young girl having fun while watching a movie using the toy movie machine. The airline is targeting plane travelers by promising to offer the best flight entertainment. This according to the airline will be able to have them enjoy their journey through entertainment and not be able to realize how long the journey is. The airline...
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