Fundamentals of Managerial Economics – Lecture Vocabulary

Vocabulary flashcards covering the major economic concepts, managerial principles, and study techniques discussed in the lecture.

Teaching the Concept

Study technique in which you teach material to someone else, yielding about 90 % retention.

Active Recall

Learning method that strengthens memory by repeatedly writing or reciting what you remember without looking at notes.

Feynman Technique

Approach of explaining a topic as if to a 5-year-old to reveal and fill gaps in understanding.

Spaced Repetition

Scheduling reviews of material at increasing intervals (e.g., Day 1, Day 3, Day 7) to boost long-term retention.

Pomodoro Technique

Time-management method that alternates focused work intervals with short, strategic breaks.

Managerial Economics

Application of economic theory and quantitative tools to managerial decision-making under resource scarcity.

Minimum Wage Law

Legislation requiring employers to pay workers no less than a legally specified hourly wage.

Price Floor

Government-imposed minimum price that can create excess supply, such as unemployment from a high minimum wage.

Surplus Unemployment

Excess labor supply that arises when mandated wages exceed the natural market rate.

Opportunity Cost

Value of the best alternative foregone when a decision is made.

Accounting Profit

Total revenue minus explicit (out-of-pocket) costs shown on financial statements.

Economic Profit

Total revenue minus explicit costs and opportunity costs, measuring true profitability.

Input Costs

Expenses—including materials, labor, energy—incurred in producing a good or service.

Risk Premium

Extra amount added to prices to compensate for potential supply disruptions or other uncertainties.

Inflation

General rise in prices across the economy, often driven by higher input or fuel costs.

Risk-Driven Oil Price Spike

Increase in oil prices caused by geopolitical conflict and anticipated supply disruptions.

Market Fear

Price movement based on investor anxiety about possible future events rather than current supply-demand data.

Manager

Person who directs resources—people, money, materials—to achieve a stated goal, regardless of rank.

Resources

Any assets—tangible or intangible—used to produce goods or services.

Pricing and Output Decision

Managerial choice regarding what price to charge and how much to produce.

Production Process Optimization

Selecting the most efficient method and technology mix to create a product.

Input Mix

Combination of labor, capital, and materials used in the production process.

Product Quality Decision

Choice between higher-quality, costlier inputs and cheaper, lower-quality ones.

Horizontal Merger

Acquisition of a competing firm operating at the same stage of the value chain.

Vertical Merger

Acquisition of a supplier or distributor to control additional stages of the value chain.

Internal Incentives

Rewards such as raises, benefits, or commissions offered to employees to boost performance.

External Incentives

Promotions, discounts, or loyalty programs designed to attract and retain customers.

Commission

Performance-based payment giving employees a share of the sales they generate.

Member Card Program

External incentive offering recurring benefits to loyal customers to encourage repeat purchases.

Digital Services Tax

Government levy applied to online platforms (e.g., Netflix, Spotify), often passed on to consumers through higher prices.

Consumer-Producer Rivalry

Market situation where buyers and sellers bargain aggressively over price (e.g., haggling in retail stalls).

Consumer-Consumer Rivalry

Market characterized by bidding wars among buyers for scarce goods (e.g., tuna auctions).

Producer-Producer Rivalry

Competition among sellers for consumer attention in markets with abundant supply; sellers often use constant sales or ads.

Five Forces Framework

Michael Porter’s model for analyzing the competitive forces that shape industry profitability.

Government Intervention

Taxes, price controls, or regulations introduced to correct perceived market problems.

Time Value of Money

Idea that a peso today is worth more than the same peso in the future because it can earn returns.

Goal

Specific target or outcome a manager aims to achieve.

Constraint

Limitation or obstacle that restricts attainment of a goal and requires countermeasures.

Economic Analysis

Systematic evaluation of alternatives using concepts like economic profit to guide decisions.

Capitalist Ideal of Self-Interest

Adam Smith’s view that businesses act primarily to maximize their own profit, not out of altruism.

Supply and Demand

Fundamental economic model explaining price determination through interaction of buyers and sellers.

Scarce Resources

Limited inputs that necessitate choice and prioritization in production and consumption.

Spaced Review Day

Scheduled study session within a spaced-repetition plan (e.g., “Day 1 review”).

Active Taxation Strategy

Government practice of broadening the tax base—such as taxing digital firms—to raise revenue.

Economic Fear / Speculation

Market behavior where traders bid up prices based on anticipated, not actual, shortages.