Managerual Economics( Chapter 1-2)

The History of Economics

How humanity transitioned from basic asset allocation to mathematical model building

Understand Market

negative markets rivalries(buyer-seller, seller-seller, buyer-buyer) to capture maximus surplus and project positioning

Time value of money

Apply present value (PV) and net present value(NPV) mathematics to amke optimal capital budgeting and purchase decision.

marginal Analysis

Compare incremental benefits with i cremental cost. adjust variable units to the optimum level MB=MC

understand market

Understanding competition between buyers and sellers to make better business decisions and maximize surplus.

Time value money

The concept that money today is worth more than the same amount in the future because it can earn returns

marginal analysis

Comparing the additional (incremental) benefits and additional (incremental) costs of one more unit to make the best decision.

economies of scale

A decrease in the average cost per unit as production increases.

fixed cost

A cost that remains constant regardless of the level of production or sales.

Demand

consumers desire to purchase

Law of demand

As price increases, quantity demanded decreases, as price decreases , quantity demand increases. ceteris paribus.

equilibrium

The point where quantity demanded equals quantity supplied.

surplus

Excess supply, where quantity supplied is greater than quantity demanded.

shortage

Excess demand, where quantity demanded is greater than quantity supplied.

ielastic demand

Demand where a small change in price causes a large (drastic) change in quantity demanded.

inelastic demand

Demand where a change in price causes only a small change in quantity demanded.

elastic

The degree of responsiveness or sensitivity to change.

inelastic

Not very responsive or sensitive to change; a change causes only a small effect.

elastic supply

Supply where a small change in price causes a large change in quantity supplied.

inelastic supply

Supply where a change in price causes only a small change in quantity supplied.

No change in consumer tastes and preferences.

Income remains constant.

No substitute goods

what are the Assumptions on demand

Price of related goods and services

Income of buyers

Prices of related goods

Tastes and preferences of customers

Consumer expectations

What are the five determinants of demand?

inferior goods

Goods whose demand decreases as consumer income increases.

complementary goods

Goods used together, such as coffee and sugar.

substitute goods

Goods that can replace each other, such as Coke and Pepsi.

Law of supply

As price increases, quantity supplied increases, price decreases, quantity supplied decreases ceteris paribus

Prices of inputs

Level of technology

Number of firms in the market-competitors

Producer expectations

five supply shifters are?

normal goods

Goods whose demand increases as consumer income increases.

Economics

The study of how people allocate scarce resources to satisfy unlimited wants.

-Subject or field of study

Economic thought

The history and evolution of ideas and theories about economics.

Broze Age

The earliest stage of economics where civilizations practiced basic resource allocation by recording and distributing assets and resources.

Bronze Age

Sumerian, Indus, Yanguze and Nile records show formal allocation of assets and resources

18th century

What century does Adam Smith developed the Free Market Theory, which states that markets work best when buyers and sellers are free to compete with minimal government intervention.

18th century

What century does adam smith develops market theis based on French Enlightenment

Late 19th century

what century does Alfred Marshall and Léon Walras introduced mathematical models to economics, making it more scientific and measurable.

Late 19th century

Alred marshall &Walras introduce mathematical concept ro determine economics

20th century

When does John Maynard Keynes and Milton Friedman developed economic theories that became the foundation of modern government and central bank policies.

20th century

John Maynard Keyner & Milton Friedman form base theories for modern central bank policies in

Adam Smith

Develops/contribute free market?

Mathematical concepts to define economics

What did alfred marshall &Walras contribute

base theories for banks

What did John Maynard Keynes & Milton Friedman contribute?

Adam Smith

Father of Economics

Free Market

An economy where buyers and seller determine prices with limited government intervention

Managerial Economics

Apllication of economic principle and theories to help managers make better business decisions

Scarce

Limited resources available to satisfy unlimited wants

Adam Smith

Who developed Free Market

Economic thought

The ideas, theories, and principles developed by economists to explain how economies work.

History of Economic thought

The study of how economic ideas and theories evolved through the contributions of economists over time.

History of Economics

The study of how economics developed as a field of study over time, from early resource allocation to modern economic theories and mathematical models.

Managerial Economics

The science of directing scarce resources in the most efficient manner to accomplish a firms specific objectives

Managerial Economics

It comvines traditional microeconomic theories if cost, revenue, and market structure with real world business methodologies, to facilitate strategic decision making

Bridging theory and Practice

Applying economic theories and concepts ro real world business decisions

Revenue

Total income earned from selling goods and services

cost

Expenses incurred in operating a business

Market Structure

The way business compete within a market

Strategic decision making

Making important long term decisions to achieve a firms goals

Identify Goals, Rceognized Profits, Master Incentives

Core Pillars of Managemenr

Identify Goals

Clearly define the business objectives to guide planning and decision-making.

Strategic Allocation

The process of deciding how resources should be used to achieve business goals.

Pricing Strategy

A plan for setting the prices of products or services.

Recognized Profits

Understanding the purpose, source, and meaning of profits to evaluate business performance.

Profit signal

An indicator that shows whether a business's decisions are successful or need improvement.

Sustainable operation

Ability of the business to continue operating successfully over the long term

Master Incentives

Creating financial and non financial rewards to motivate employees and improve productivity

incentives

A reward or benefit that motivates people to perform better

intrinsic motivation

internal motivation that comes from personal satisfaction rather than external rewards

Productivity

The amount of output produced using available resources

Alignment

Ensuring Employees work toward the same organizational goal

Identify Goals

Sound Planning requires crystal clear objectives. Different gials force entirely distinct strategic allocations and pricing strategies

Recognized Profits

Understand the nature, source and ultimate economic purpose of profit signals. Maximize profit ensure sustainable operations

Master Incentives

Construct clear financial and intrinsuc motivation structures to induce maximum productivity and alignment within workforce

Goal

The desired result or objective that a business wants to achieve.

Constraints

Anything that limits or prevents a business from fully achieving its goal.

Constraints

Restrictive Limits

Wage floor

The minimum wage set by the government.

input

Resources used to produce goods or services, such as labor, materials, machinery, and electricity.

input pricing

The cost of the resources used in producing goods or services.

Explicit Cost

Actual cash expenses paid to outsiders, such as rent, salaries, and utilities.

Implicit Cost

The opportunity costs of using owned resources instead of their next best alternative

opportunity cost

The value of the next best alternative that is given up when making a choice.

Accounting profit

The profit calculated by subtracting only explicit costs from total revenue.

Accounting Profit= Total Revenue- Explicit cost

Formula of Accounting profit

Accounting Profit

This tradituonal profit metric measured by the total amount of money taken in from sales minus only the direct, monetary cash expenditures to operate

Economic Profit

A far more complete operational metric. It represents total revenue munus both direct explicit expenses and opportunity cost

explicit cost

Actual cash expenses paid to outsiders for resources used in a business.

Present value formulation

Receiving Money in the future comes with an implicit opportunity cost; the interest or returns you could have accumulated by having the cash in hand immediately

capital budgeting

The process of evaluating long-term investments or projects.

capital

Financial resources used to create future benefits.

Net present value

NPV is which measures whether an investment creates value after considering the initial cos

Marginal analysis

A method of comparing additional benefits and additional costs.

Marginal benefit

The additional benefit from one more unit.

marginal cost

The additional cost from one more unit.

Marginal principle

Maximize benefits by increasing activity until MB equals MC.

Entry threat, supplier power, buyer power, substitutes, industry rivalry

What are the structure of five industry?

Entry Threat

The possibility of new competitors entering an industry, influenced by capital requirements, regulations, economies of scale, and industry reputation.

supplier power

The ability of suppliers to influence prices, supply, and contract terms due to limited competition among suppliers.

buyer power

The ability of customers to negotiate lower prices or switch to competing products or services.(lazada to shopee)