Introduction to Managerial Economics Economic concepts Economic tools

Introduction to Managerial Economics • Economic concepts • Economic tools • Economic methodology

Using Economics in Managerial Decision Making • What is economics? • Economic rhetoric

The Economic Problem • Questions • Issues • Managerial decisions

Decision Making Problems • • • Product price and output Make or buy Production technique Inventory levels Foreign exchange

Economic Concepts • Theory of consumer behavior • Theory of the firm – Production and cost • Theory of market structure – Competition, monopoly, oligopoly • Terminology

Objectives of the Firm • Profit maximization • Cash flow • Alternative objectives – Shareholder value

Defining Value • Role of valuation • Determinants of value • Creating and capturing value

Nature of Profits • Definition • Sources • Role – Incentives – Signal

Theories of Profit • • • Risk-taking Frictional Monopoly rents Innovation Managerial efficiency

Principal-Agent Problem • Conflicting motivations among groups • Solutions

Goals in the Not-for-Profit Sector • Maximize quantity s. t. breakeven constraint • Maximize utility of stakeholders • Maximize cash flows

Tools of Analysis • • • Mathematics Statistical estimation Forecasting Linear programming Optimization

Methodology of Microeconomics • Model building • Scientific method – Framework – Theory – Hypothesis – Empirical test • Neoclassical framework

Social Responsibility of Business • • Invisible hand Market imperfections Exploitation Government response