Managerial Economics: Kick Off
Course Content Overview
Objective: Provide an overview of foundational economics, key economic ideas, law of demand and supply, and market structure.
Approach: Practical and interactive, focusing on examples and applications of economic theories.
Basic Principles of Economics
**Why Economic Science Arises: **
Rooted in the mismatch between unlimited human needs and limited natural resources.
Economic problems arise leading to:
Optimization.
Maximization of utility.
Best resource allocation.
Scarcity: Condition of limited resources against unlimited desires.
Influences the search for solutions in resource allocation.
Human Activities Beyond Economic Context
Examples of Non-Scarcity Activities:
Examples include:
Thinking.
Breathing.
Dreaming.
Basic interactions: sports in parks, casual conversations.
Activities that do not require economic rules due to lack of financial limitation.
Ultimate Human Goals
Non-Economic Activities:
These are deep human needs disconnected from economic exchanges.
Examples include:
Meeting friends.
Pursuing happiness and spirituality.
Music and Arts: Access may be free in some contexts but not in others (e.g., museum entry fees).
Classification of Economic Goods
Parameters for Classification: Rivalry and Excludability.
Rivalry: Presence of others negatively impacts experience.
Example: Crowded clubs may reduce satisfaction.
Excludability: Provider's ability to restrict access to goods or services.
**Types of Goods: **
Private Goods:
Ownership follows purchase (e.g., concert tickets).
Club Goods:
Excluded by the provider but no rivalry in consumption (e.g., satellite television).
Common Goods:
Rivalry present, but non-excludable (e.g., public parks, ocean fish).
Subject to regulation to prevent depletion.
Public Goods:
Non-rivalrous and non-excludable (e.g., public parks).
Managed by public authorities due to market failure issues.
Market Failure in Public Goods
Market Failure: Occurs when provision benefits the community, but individual demand does not justify prices.
Conclusion: Public goods need public management due to collective benefits.
Understanding Human Needs
Definition of Human Needs:
Sense of lack requiring action to fulfill.
Includes both rational and emotional dimensions affecting satisfaction.
Examples:
Not just survival needs (food/shelter) but leisure and social needs too.
Entrepreneurial Focus on Human Needs
Key Idea: Successful entrepreneurship targets human needs rather than merely focusing on products.
Need-based Approach: Identifying and addressing unmet needs leads to competitive advantage.
Classifying Human Needs
Classification Criteria:
Needs based on space and time variations, deferrability, and flexibility.
Space and Time Variability:
Location and era influence human needs (e.g., climate impacts demands).
Examples:
People in colder climates tend to require more medication.
Lifestyle differences in urban versus rural environments.
Needs based on deferrability:
Deferrable vs. Undeferable Needs:
Deferrable needs can be postponed (e.g., buying clothes).
Undeferable needs must be addressed immediately (e.g., food, water).
Importance of Pricing Strategies
Dynamic Pricing and Scarcity:
Companies utilize strategies to influence consumer urgency in purchasing decisions.
Example: Ryanair’s pricing model capitalizes on urgency as passengers wait until the last minute.
Collective vs Individual Needs:
Individual needs are private and fulfilled individually.
Collective, communal needs must be managed through public institutions to ensure security and satisfaction for all.
Conclusion and Encouragement for Participation
Wrap-Up: Promotes engagement through asynchronous activities and encourages feedback for improving interactive learning.
Closing Remarks: Instructor's closing sentiments; invite students to remain engaged for future sessions.