This is the First Chapter of Managerial Economics Masters of Business Study (MBS), first semester,
it is useful for anyone who wants to know managerial economics.
Introduction of economics | Managerial Economics | Natures and ScopeSachin Paurush
Introduction of economics | Managerial Economics | Natures and Scope
The crucial concepts of Managerial Economics.
Where all economics is applied and how it is going to affect one's life!!!
The document summarizes key concepts from Chapter 2 of a managerial economics textbook. It discusses [1] the assumptions of the neoclassical profit-maximizing model of the firm, including that firms maximize profits, act as single entities, and have perfect certainty. It then [2] contrasts this with managerial models where managers' interests may differ from shareholders and firms are run to maximize sales or manager utility. [3] The behavioral model views firms as coalitions of individuals who "satisfice" rather than optimize objectives.
The document provides an overview of key economic concepts including microeconomics, macroeconomics, demand analysis, determinants of demand, the law of demand, demand curve, demand schedule, exceptions to the law of demand, individual demand versus market demand, circular flow of economic activity, and discusses how market research has found the law of demand is not always applicable in analyzing consumer behavior. It also outlines basic concepts such as scarcity, opportunity cost, productivity, and profit.
This document provides definitions and explanations of key concepts in economics. It discusses how economics was defined by Adam Smith, Alfred Marshal, and Lionel Robbins. It also defines microeconomics as focusing on individual units while macroeconomics looks at aggregates. Economic decisions around production, exchange, and consumption are explained. Managerial economics is introduced as integrating economics, decision sciences, and business administration to examine how firms can achieve goals. Micro and macroeconomics are applied to managerial issues and business environment respectively. The scope and applications of managerial economics are outlined.
Managerial economics applies economic theory and decision-making tools to help managers solve problems and make optimal decisions. It combines resources to produce and sell goods and services while maximizing profits. Managerial economics examines how firms can achieve objectives efficiently by considering profit maximization, sales, adequate rates of return, and management utility.
The document discusses key concepts in managerial economics. It defines managerial economics as the application of economic analysis to business decision making. A business faces an economic problem of scarce resources and unlimited wants. It must make decisions around what, how, how much and for whom to produce. Managerial economists help study the business environment, operations, create economic intelligence and raise public awareness. Common objectives for firms include profit maximization, sales maximization, and growth maximization. Demand is determined by factors like price, income, tastes and expectations. The law of demand states that demand is inversely related to price, with assumptions and exceptions.
Introduction of economics | Managerial Economics | Natures and ScopeSachin Paurush
Introduction of economics | Managerial Economics | Natures and Scope
The crucial concepts of Managerial Economics.
Where all economics is applied and how it is going to affect one's life!!!
The document summarizes key concepts from Chapter 2 of a managerial economics textbook. It discusses [1] the assumptions of the neoclassical profit-maximizing model of the firm, including that firms maximize profits, act as single entities, and have perfect certainty. It then [2] contrasts this with managerial models where managers' interests may differ from shareholders and firms are run to maximize sales or manager utility. [3] The behavioral model views firms as coalitions of individuals who "satisfice" rather than optimize objectives.
The document provides an overview of key economic concepts including microeconomics, macroeconomics, demand analysis, determinants of demand, the law of demand, demand curve, demand schedule, exceptions to the law of demand, individual demand versus market demand, circular flow of economic activity, and discusses how market research has found the law of demand is not always applicable in analyzing consumer behavior. It also outlines basic concepts such as scarcity, opportunity cost, productivity, and profit.
This document provides definitions and explanations of key concepts in economics. It discusses how economics was defined by Adam Smith, Alfred Marshal, and Lionel Robbins. It also defines microeconomics as focusing on individual units while macroeconomics looks at aggregates. Economic decisions around production, exchange, and consumption are explained. Managerial economics is introduced as integrating economics, decision sciences, and business administration to examine how firms can achieve goals. Micro and macroeconomics are applied to managerial issues and business environment respectively. The scope and applications of managerial economics are outlined.
Managerial economics applies economic theory and decision-making tools to help managers solve problems and make optimal decisions. It combines resources to produce and sell goods and services while maximizing profits. Managerial economics examines how firms can achieve objectives efficiently by considering profit maximization, sales, adequate rates of return, and management utility.
The document discusses key concepts in managerial economics. It defines managerial economics as the application of economic analysis to business decision making. A business faces an economic problem of scarce resources and unlimited wants. It must make decisions around what, how, how much and for whom to produce. Managerial economists help study the business environment, operations, create economic intelligence and raise public awareness. Common objectives for firms include profit maximization, sales maximization, and growth maximization. Demand is determined by factors like price, income, tastes and expectations. The law of demand states that demand is inversely related to price, with assumptions and exceptions.
Managerial economics and financial analysisglory1988
This document outlines the topics covered in a course on Managerial Economics and Financial Analysis. The course covers 8 units:
1) Introduction to managerial economics and demand analysis.
2) Elasticity of demand and demand forecasting methods.
3) Production theory, costs analysis, and break-even analysis.
4) Market structures, pricing policies, and managerial theories of the firm.
5) Types of industrial organization.
6) Introduction to financial accounting and financial statements.
7) Interpretation and analysis of financial statements using ratios.
8) Capital budgeting methods like payback, accounting rate of return, IRR, and net present value.
This document outlines the objectives and content of an MBA course on managerial economics. The objectives are to understand the relevance of economics in business management and study functional areas like marketing, production, and costing from a broader economic perspective. The course content covers topics such as the role of managerial economists, theories of the firm and optimization techniques, basic economic principles, demand and supply analysis, cost theory, market structures and pricing practices, profit management, and economics for tourism and hospitality industries. Reference books on managerial economics are also provided.
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Mohammad Abadullah
Dilruba Jahan Popi
Rabiul Islam
Effat Ara Saima
MD. Rajib Mojumder (Captain)
Economics is the study of how individuals, businesses, and societies allocate scarce resources. It examines human behavior in relation to decisions about production, distribution, and consumption of goods and services.
Managerial economics applies economic theory and quantitative methods to managerial decision-making. It helps managers optimize business operations and strategies using tools like demand analysis, cost-benefit analysis, and forecasting. Managerial economics has a wide scope across production, finance, marketing, human resources, and IT departments of an organization.
Managerial economics is the study of how people and societies choose to employ scarce resources to produce goods and services over time and how to distribute them for consumption. It involves analyzing operational/internal issues like production, costs, and pricing using microeconomics and environmental/external issues like the economy, policies, and markets using macroeconomics. The key questions addressed are what and how to produce and for whom, from both a country and company perspective. Resources are scarce so there is a need to allocate them efficiently, which involves opportunity costs and maintaining a balance shown by the production possibility curve. Economic growth requires capital accumulation and technological progress through investing in capital goods rather than immediate consumption.
Economic analysis for business decisionsRevaMittal
The document provides an overview of economic foundations and principles from the perspective of a firm. It discusses that economics involves decision making and scarce resources. A firm's objectives may include maximizing profits, sales, growth or manager utility rather than solely profit maximization. Additionally, the separation of ownership and control in large firms can lead to a divergence of interests between managers and shareholders. Firms may pursue satisficing behavior rather than strictly optimizing profits.
Managerial economics deals with applying economic concepts and theories to solve business problems. It combines economics and management. Managerial economics helps managers minimize risk and uncertainty, analyze the effects of government policies, and aid in profit planning and control, demand forecasting, and cost control. It also measures business efficiency. Managerial economics provides tools to analyze risks, uncertainties, and the impacts of government policy changes on business. It further helps with profit planning, production demand forecasting, and cost control to improve business performance.
Managerial economics is the application of economic theory and methodology to managerial decision making. It helps managers optimize business behavior and integrate economic theory with business practice to facilitate optimal decision making. Some key concepts in managerial economics include opportunity cost, marginality, production possibility frontier, and discounting principle. Managerial economics uses both microeconomic and macroeconomic analysis to address internal business issues like production, pricing, investment decisions as well as external issues like industry trends and government policies. The goal is to help managers make rational economic choices and maximize profits given scarce resources.
This document provides an introduction to managerial economics. It defines managerial economics and discusses its nature and scope. The scope includes demand analysis and forecasting, cost and production analysis, pricing decisions, policies and practices, profit management, and capital management. It also defines the objectives of a firm as typically being profit maximization or sales maximization. It then provides information on demand analysis, including the objectives and components of demand analysis like demand functions and elasticities.
The document discusses the role and responsibilities of a managerial economist in business. It covers topics such as market research, production scheduling, capital budgeting, minimizing costs, and advising on issues like foreign exchange. It also examines the relationship between managerial economics and other business functions/disciplines such as economics, statistics, mathematics, accounting, and operations research. Some key principles of managerial economics covered include opportunity cost, incremental cost, time perspective, discounting, and the equi-marginal principle.
Managerial economics applies economic principles and methodologies to business decision-making. It seeks to establish rules and principles to help businesses attain their economic goals. The key aspects of managerial economics are decision-making, using economic methodology, and achieving the economic goals of the firm like maximizing profits from scarce resources. While economic theories are too general, managerial economics adds business logic and analytical tools to make the theories useful for rational managerial decision-making.
Managerial economics applies economic theory and analysis to business decision-making and problem-solving. It helps managers make informed choices by examining factors like demand, production, costs, pricing, and resource allocation. The managerial economist assists management in areas such as investment analysis, production planning, cost-benefit analysis, and forecasting to optimize firm performance and profits within the economic environment. They are responsible for providing economic data and insights to facilitate strategic decision-making.
1) This document discusses demand and supply analysis, which provides the essential background for managerial economic problems. It covers the model of demand and supply, which is a key tool in economics.
2) The document outlines demand, supply, and market equilibrium. It explains how equilibrium price and quantity are determined by the intersection of supply and demand curves. It also discusses how non-price factors can shift the curves and change equilibrium.
3) The roles of price in the short-run (rationing function) and long-run (guiding/allocating function) are explained. In the short-run, price adjusts to clear surpluses and shortages, while in the long-run it guides
This document outlines a Business Economics course offered at an engineering institution. The 3 credit, 3rd year course introduces students to basic microeconomic and macroeconomic principles, tools, and analysis. It aims to help students make better business and investment decisions. The syllabus covers topics like demand and supply, costs and profits, markets, national income accounting, monetary policy, and capital budgeting. Students will learn to analyze firms and the economy under different conditions, prepare basic financial statements, and evaluate projects and policies. Evaluations include assignments, internal exams, and an end semester exam assessing content from all topics.
Managerial economics is the application of economic theory and methodology to address practical business problems. It helps managers make decisions regarding demand analysis, cost analysis, pricing, profit management, and capital management. Specifically, it provides frameworks for demand forecasting, cost-output analysis, determining optimal prices and pricing strategies, profit planning and measurement, and evaluating capital investment projects and managing a firm's capital. The goals and objectives of firms include maximizing sales revenue, growth rate, managerial utility, satisfying multiple constituencies, and long-run survival with sufficient market share.
Fundamental concepts, principle of economicsShompa Nandi
Fundamental Concept or Principle of Economics, Opportunity cost principle, Equi-marginal principle, incremental principle, discounting principle, Risk and uncertainty, Time Perspective
The document provides an overview of economics, including:
1) It defines economics and traces its history from ancient Greek and Indian texts to modern works.
2) It describes the differences between microeconomics, which studies individual agents, and macroeconomics, which studies aggregate economic behavior and the overall economy.
3) It outlines the nature, scope, needs, importance or economics as well as the types, objectives, and determinants of economic growth from both micro and macro perspectives.
Basic principles in the application of managerial economicsMilan Verma
Basic Principles in the Application of Managerial Economics, what is economics and introduction, Micro economics
Normative (prescriptive) science, Pragmatic (Practical), Uses Macro economics, Uses theory of firm, Management oriented, Multi disciplinary, Art and science. Scope of Managerial Economics, theory of demand and demand analysis, envirmental issues, Significance of managerial economics in decision making, Significance of managerial economics in decision making
This document summarizes the scope of managerial economics as presented in a report by M.L.V Surya for their 1st year MBA at Aditya College of Engineering and Technology. The scope includes demand analysis and forecasting, cost analysis, production and supply analysis, pricing decisions and policies, profit management, and capital management. Demand analysis is important for production scheduling and resource allocation. Cost analysis uses economic costs and accounting data to estimate costs. Production analysis considers production functions while supply analysis examines supply schedules, curves, elasticity, and factors influencing supply. Pricing must be correctly determined based on market conditions. Profit management is challenging due to uncertainty in costs and revenues. Capital management involves planning and
Managerial economics emerged to address the growing complexity of business decision making due to changing market conditions. It applies economic theories and analysis to business problems and decisions. Microeconomics examines individual and firm behavior and issues like production, costs, pricing, and profits. Macroeconomics analyzes whole economies and external issues like growth, employment, prices and government policy. A managerial economist assists with demand forecasting, market analysis, pricing, investment decisions, and evaluating the economic environment to inform business planning and strategy. The key is to apply economic logic and tools to optimize business decision making under various market conditions.
The document outlines a 14-week semester plan for a managerial economics course. Week 1 covers an introduction to managerial economics including its scope and relationship to other fields. Weeks 2-3 cover optimization techniques and new management tools. Subsequent weeks cover topics such as demand theory, estimation, and forecasting; production theory and costs; market structures; pricing practices; and capital budgeting. The course utilizes economic theory and decision analysis tools to address managerial problems. References for the course are also provided.
Managerial economics and financial analysisglory1988
This document outlines the topics covered in a course on Managerial Economics and Financial Analysis. The course covers 8 units:
1) Introduction to managerial economics and demand analysis.
2) Elasticity of demand and demand forecasting methods.
3) Production theory, costs analysis, and break-even analysis.
4) Market structures, pricing policies, and managerial theories of the firm.
5) Types of industrial organization.
6) Introduction to financial accounting and financial statements.
7) Interpretation and analysis of financial statements using ratios.
8) Capital budgeting methods like payback, accounting rate of return, IRR, and net present value.
This document outlines the objectives and content of an MBA course on managerial economics. The objectives are to understand the relevance of economics in business management and study functional areas like marketing, production, and costing from a broader economic perspective. The course content covers topics such as the role of managerial economists, theories of the firm and optimization techniques, basic economic principles, demand and supply analysis, cost theory, market structures and pricing practices, profit management, and economics for tourism and hospitality industries. Reference books on managerial economics are also provided.
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Mohammad Abadullah
Dilruba Jahan Popi
Rabiul Islam
Effat Ara Saima
MD. Rajib Mojumder (Captain)
Economics is the study of how individuals, businesses, and societies allocate scarce resources. It examines human behavior in relation to decisions about production, distribution, and consumption of goods and services.
Managerial economics applies economic theory and quantitative methods to managerial decision-making. It helps managers optimize business operations and strategies using tools like demand analysis, cost-benefit analysis, and forecasting. Managerial economics has a wide scope across production, finance, marketing, human resources, and IT departments of an organization.
Managerial economics is the study of how people and societies choose to employ scarce resources to produce goods and services over time and how to distribute them for consumption. It involves analyzing operational/internal issues like production, costs, and pricing using microeconomics and environmental/external issues like the economy, policies, and markets using macroeconomics. The key questions addressed are what and how to produce and for whom, from both a country and company perspective. Resources are scarce so there is a need to allocate them efficiently, which involves opportunity costs and maintaining a balance shown by the production possibility curve. Economic growth requires capital accumulation and technological progress through investing in capital goods rather than immediate consumption.
Economic analysis for business decisionsRevaMittal
The document provides an overview of economic foundations and principles from the perspective of a firm. It discusses that economics involves decision making and scarce resources. A firm's objectives may include maximizing profits, sales, growth or manager utility rather than solely profit maximization. Additionally, the separation of ownership and control in large firms can lead to a divergence of interests between managers and shareholders. Firms may pursue satisficing behavior rather than strictly optimizing profits.
Managerial economics deals with applying economic concepts and theories to solve business problems. It combines economics and management. Managerial economics helps managers minimize risk and uncertainty, analyze the effects of government policies, and aid in profit planning and control, demand forecasting, and cost control. It also measures business efficiency. Managerial economics provides tools to analyze risks, uncertainties, and the impacts of government policy changes on business. It further helps with profit planning, production demand forecasting, and cost control to improve business performance.
Managerial economics is the application of economic theory and methodology to managerial decision making. It helps managers optimize business behavior and integrate economic theory with business practice to facilitate optimal decision making. Some key concepts in managerial economics include opportunity cost, marginality, production possibility frontier, and discounting principle. Managerial economics uses both microeconomic and macroeconomic analysis to address internal business issues like production, pricing, investment decisions as well as external issues like industry trends and government policies. The goal is to help managers make rational economic choices and maximize profits given scarce resources.
This document provides an introduction to managerial economics. It defines managerial economics and discusses its nature and scope. The scope includes demand analysis and forecasting, cost and production analysis, pricing decisions, policies and practices, profit management, and capital management. It also defines the objectives of a firm as typically being profit maximization or sales maximization. It then provides information on demand analysis, including the objectives and components of demand analysis like demand functions and elasticities.
The document discusses the role and responsibilities of a managerial economist in business. It covers topics such as market research, production scheduling, capital budgeting, minimizing costs, and advising on issues like foreign exchange. It also examines the relationship between managerial economics and other business functions/disciplines such as economics, statistics, mathematics, accounting, and operations research. Some key principles of managerial economics covered include opportunity cost, incremental cost, time perspective, discounting, and the equi-marginal principle.
Managerial economics applies economic principles and methodologies to business decision-making. It seeks to establish rules and principles to help businesses attain their economic goals. The key aspects of managerial economics are decision-making, using economic methodology, and achieving the economic goals of the firm like maximizing profits from scarce resources. While economic theories are too general, managerial economics adds business logic and analytical tools to make the theories useful for rational managerial decision-making.
Managerial economics applies economic theory and analysis to business decision-making and problem-solving. It helps managers make informed choices by examining factors like demand, production, costs, pricing, and resource allocation. The managerial economist assists management in areas such as investment analysis, production planning, cost-benefit analysis, and forecasting to optimize firm performance and profits within the economic environment. They are responsible for providing economic data and insights to facilitate strategic decision-making.
1) This document discusses demand and supply analysis, which provides the essential background for managerial economic problems. It covers the model of demand and supply, which is a key tool in economics.
2) The document outlines demand, supply, and market equilibrium. It explains how equilibrium price and quantity are determined by the intersection of supply and demand curves. It also discusses how non-price factors can shift the curves and change equilibrium.
3) The roles of price in the short-run (rationing function) and long-run (guiding/allocating function) are explained. In the short-run, price adjusts to clear surpluses and shortages, while in the long-run it guides
This document outlines a Business Economics course offered at an engineering institution. The 3 credit, 3rd year course introduces students to basic microeconomic and macroeconomic principles, tools, and analysis. It aims to help students make better business and investment decisions. The syllabus covers topics like demand and supply, costs and profits, markets, national income accounting, monetary policy, and capital budgeting. Students will learn to analyze firms and the economy under different conditions, prepare basic financial statements, and evaluate projects and policies. Evaluations include assignments, internal exams, and an end semester exam assessing content from all topics.
Managerial economics is the application of economic theory and methodology to address practical business problems. It helps managers make decisions regarding demand analysis, cost analysis, pricing, profit management, and capital management. Specifically, it provides frameworks for demand forecasting, cost-output analysis, determining optimal prices and pricing strategies, profit planning and measurement, and evaluating capital investment projects and managing a firm's capital. The goals and objectives of firms include maximizing sales revenue, growth rate, managerial utility, satisfying multiple constituencies, and long-run survival with sufficient market share.
Fundamental concepts, principle of economicsShompa Nandi
Fundamental Concept or Principle of Economics, Opportunity cost principle, Equi-marginal principle, incremental principle, discounting principle, Risk and uncertainty, Time Perspective
The document provides an overview of economics, including:
1) It defines economics and traces its history from ancient Greek and Indian texts to modern works.
2) It describes the differences between microeconomics, which studies individual agents, and macroeconomics, which studies aggregate economic behavior and the overall economy.
3) It outlines the nature, scope, needs, importance or economics as well as the types, objectives, and determinants of economic growth from both micro and macro perspectives.
Basic principles in the application of managerial economicsMilan Verma
Basic Principles in the Application of Managerial Economics, what is economics and introduction, Micro economics
Normative (prescriptive) science, Pragmatic (Practical), Uses Macro economics, Uses theory of firm, Management oriented, Multi disciplinary, Art and science. Scope of Managerial Economics, theory of demand and demand analysis, envirmental issues, Significance of managerial economics in decision making, Significance of managerial economics in decision making
This document summarizes the scope of managerial economics as presented in a report by M.L.V Surya for their 1st year MBA at Aditya College of Engineering and Technology. The scope includes demand analysis and forecasting, cost analysis, production and supply analysis, pricing decisions and policies, profit management, and capital management. Demand analysis is important for production scheduling and resource allocation. Cost analysis uses economic costs and accounting data to estimate costs. Production analysis considers production functions while supply analysis examines supply schedules, curves, elasticity, and factors influencing supply. Pricing must be correctly determined based on market conditions. Profit management is challenging due to uncertainty in costs and revenues. Capital management involves planning and
Managerial economics emerged to address the growing complexity of business decision making due to changing market conditions. It applies economic theories and analysis to business problems and decisions. Microeconomics examines individual and firm behavior and issues like production, costs, pricing, and profits. Macroeconomics analyzes whole economies and external issues like growth, employment, prices and government policy. A managerial economist assists with demand forecasting, market analysis, pricing, investment decisions, and evaluating the economic environment to inform business planning and strategy. The key is to apply economic logic and tools to optimize business decision making under various market conditions.
The document outlines a 14-week semester plan for a managerial economics course. Week 1 covers an introduction to managerial economics including its scope and relationship to other fields. Weeks 2-3 cover optimization techniques and new management tools. Subsequent weeks cover topics such as demand theory, estimation, and forecasting; production theory and costs; market structures; pricing practices; and capital budgeting. The course utilizes economic theory and decision analysis tools to address managerial problems. References for the course are also provided.
The document outlines a 14-week semester plan for a Managerial Economics course. Week 1 covers the nature and scope of managerial economics, including its relationship to economic theory, decision sciences, and business administration. Weeks 2-3 cover optimization techniques and new management tools, including presenting economic relationships, and the relationships between total, average, and marginal values. The course continues through demand theory, estimation, and forecasting; production and cost theory; market structure; pricing practices; and capital budgeting. Key economic concepts like demand, costs, profits, and optimization are discussed.
The document outlines a 14-week semester plan for a Managerial Economics course. Week 1 covers an introduction to managerial economics including its scope and relationship to other fields. Weeks 2-3 cover optimization techniques and new management tools, including presenting economic relationships, and concepts of total, average, and marginal. Subsequent weeks cover topics such as demand theory, estimation, and forecasting; production and cost theory; market structure; pricing practices; and capital budgeting. References are also provided. The course aims to apply economic theory and decision-making tools to solve business problems.
The document outlines a semester plan for a Managerial Economics course. Week 1 covers the nature and scope of managerial economics including its relationship to economic theory, decision sciences, and business administration. Weeks 2-3 cover optimization techniques and new management tools, including presenting economic relationships, total, average, and marginal concepts, and optimization analysis. The semester plan continues through week 14 covering topics such as demand theory, estimation, and forecasting; production, costs, and market structures; pricing practices; and capital budgeting.
The document outlines a 14-week semester plan for a Managerial Economics course. Week 1 covers an introduction to managerial economics including its scope and relationship to other fields. Weeks 2-3 cover optimization techniques and new management tools, including presenting economic relationships, and concepts of total, average, and marginal costs and profits. Subsequent weeks cover topics such as demand theory, estimation and forecasting, production theory, cost theory, market structures, pricing practices, and capital budgeting. References for the course are also provided.
Business Economics unit-1 Osmania University IMBA Balasri Kamarapu
Managerial economics is the application of economic theory and methodology to managerial decision making. It helps managers make optimal decisions about allocating scarce resources. Some key concepts in managerial economics include opportunity cost, incremental cost, time perspective, discounting, and the equi-marginal principle. Opportunity cost refers to the next best alternative forgone in making a decision. Incremental cost is the additional cost of producing one more unit. Managers must consider both short-run and long-run time perspectives. Discounting accounts for the time value of money by calculating present values. The equi-marginal principle suggests allocating resources to equalize marginal productivity gains across activities.
Managerial economics for mm ims semester 1Ankur Rai
This document provides an overview of managerial economics and its key concepts. It begins with definitions of managerial economics as the application of economic theory and tools of analysis to help organizations achieve objectives efficiently. It describes the nature, scope, characteristics, and significance of managerial economics, as well as its relationship to other fields like economics, operations research, and statistics. The document then covers fundamental concepts in managerial economics including incremental reasoning, marginal analysis, consumer behavior theory, and theories of the firm. It emphasizes that managerial economics uses economic analysis to help managers make optimal decisions.
in this topic we are going to learn managerial economics where we explore how businesses make informed decisions in a constantly changing economic landscape
The document discusses the objectives of business firms. It states that the conventional view is that profit maximization is the sole objective of businesses. However, other objectives exist as well, such as maximizing sales revenue, growth rate, or manager's utility. The document then focuses on profit as a key business objective. It defines accounting profit versus economic profit, with economic profit accounting for implicit opportunity costs. The objectives of business incubators are also outlined, which aim to support startups and increase survival rates through various resources and services.
The document discusses the objectives of a firm. It begins by questioning whether the sole objective is profit maximization, noting criticisms of this view. Alternative objectives proposed include maximizing sales and maximizing balanced growth. Balanced growth is defined as equal growth in demand for the firm's products and supply of capital to the firm. Both owners and managers are said to aim at their own goals - owners at profits and market share, managers at better salary, job security and growth. The firm's objective is to maximize balanced growth to satisfy both owners and managers.
This document provides an overview of managerial economics concepts. It begins with definitions of economics and managerial economics. It discusses the basic assumptions in economics of ceteris paribus and rationality. It also outlines the different types of economic analysis including micro vs macro, positive vs normative, and short run vs long run. The rest of the document discusses the decision making process in managerial economics, including the use of quantitative tools and statistical techniques. It also outlines the role of economics and the managerial economist in business decision making. It discusses growing challenges like globalization and technology that managerial economists face. Finally, it provides a short quiz with lessons about unexpected competitors.
This document provides an overview of the course Managerial Economics. It covers 5 units: introduction to managerial economics, cost analysis, market structure, national income, and monetary policy. Key concepts covered include demand, costs, production, market structures like perfect competition and monopoly, profit analysis, and investment decisions. The document also defines managerial economics as the application of economic theory to managerial decision making.
The document provides an overview and analysis of the global automotive industry, including:
- An economic analysis of industry growth trends, with continued global market growth expected despite challenges.
- Emerging opportunities and disruptive technologies transforming the industry, such as connected vehicles, autonomous driving, electrification, and smart manufacturing.
- The key forces driving changes in revenues and market shares, including regulations, new mobility options, and connectivity.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
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5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
2. Course Contents:
1. Introduction to Managerial Economics and Theories of Firm
2. Demand analysis and forecasting
3. Production and cost analysis
4. Pricing theory and practice
5. Risk Analysis
6. Market efficiency and role of the government
2KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU
3. References:
1. Adhikari, G.M., Paudel, R.K. and Regmi, K. (2017). Managerial Economics. Kathmandu:
KEC Publication and distributors
2. Dhakal, R. (2017). Managerial Economics. Kathmandu: Samjhana Publication
3. Mansfield, E. (1996). Managerial economics. New York: W.W. Norton and Co.
4. Petersen, H.C. and Lewis, W.C. (2008). Managerial Economics. New Delhi: Pearson
Education Ltd.
5. Pappas, J.L. and Hirschey, M. (1989). Fundamentals of Managerial Economics. New York:
The Dryden Press.
6. Salvatore, D. (2012). Managerial Economics. New York: McGraw Hill.
KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU 3
4. Unit 1:
Introduction to Managerial Economics and
Theories of firm
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5. Concept of Managerial Economics.
oThe concept of managerial economics was initiated after 1950’s by Prof. Dean Joel and
Practicability of managerial economics in real practice was proved by Warren E. Buffet.
oManagerial economics in its simplest form may be defined as the application of economic
theory to the problems of management.
o Managerial economics is that part of economic theory which deals with the application
of economic tools and concepts to the solution of business problems or the problems of
resource allocation among the competing ends.
o Managerial economics is the discipline which deals with the application of economic
theory to business management.
o In conclusion, Managerial economics refers to the application of economic theory and
decision science tools to find the optimal solution to business decision problems.
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6. Contd….
o Managerial economics prescribes rules for improving managerial decision.
o It tells managers how action should be undertaken to achieve
organizational goals efficiently.
o Managerial economics also helps managers recognize how economic
forces affect organizations and describes the economic consequences of
management behavior.
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7. 7KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU
Managerial Decision Making Process :
Managerial Decision Making Problems:
-Product price and output
- demand or buy
-Production Technique
-Strategy Formulation
-Advertising, investment etc.
Managerial Economics :
Use of economic concepts and decision sciences to solve managerial decision making problems.
Traditional Economics
-Theory of firm
-Theory of demand and supply
-Theory of consumer behavior
-Theory of market
-Theory of pricing etc.
Decision Making Sciences:
-Mathematical economics
-Econometrics
-Statistical analysis
-Game theory
-Optimization etc.
Optimal Solution to the managerial Decision Making Problems.
8. KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU 8
Main Concern of Managerial Economics:
(O3)
O - Opening of firms/ Industries
O - Operation of firms/ Industries
O - Out (exit ) of firms/Industries from the market.
Managerial economics believes that successful managers make good decisions
and the most useful tool of managerial decision making is the methodology of
managerial economics.
9. CHARACTERISTICS OF MANAGERIAL ECONOMICS:
1. Microeconomic in Character
2. Pragmatic
3.Normative
4. Conceptual and Tactical
5. Theory of Firm
6. Goal-oriented
7. Coordination between Theory and Practice
8. Wise Choices
9. Multidisciplinary
10. Help of Macroeconomics
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10. SCOPE OF MANAGERIAL ECONOMICS:
A. Operational Issues
◦ Demand Analysis and Forecasting
◦ Production and Cost Analysis
◦ Pricing Theory and Practices
◦ Profit Analysis and Profit Management
◦ Capital and Investment Decisions
◦ Inventory Management
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11. Contd..
B. Environmental Issues
o What is the nature and trend of domestic business environment?
o What is the nature and trend of international business
environment?
o What is the nature and impact of social costs and government
policy measures
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13. RELATION OF MANAGERIAL ECONOMICS WITH
TRADITIONAL ECONOMICS:
Relationship with microeconomics
◦ Pricing, output determination, what to produce? how to produce? How
much to invest? etc.
Relationship with macroeconomics
◦ Environmental issues
◦ Prediction of aggregate economic variables
◦ Policy issues
Note: Managerial economics differs with traditional issues in various aspects such as
practicability, character, scope, assumptions, hypothesis etc.
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14. ROLE OF MANAGERIAL ECONOMIST:
Making decisions - organizing - processing information.
Specific Decisions
(i) Producing scheduling,
(ii) Demand forecasting,
(iii) Market research,
(iv) Economic analysis of the industry,
(v) Investment appraisal,
(vi) Security management analysis,
(vii) Advice on foreign exchange management,
(viii) Advice on trade,
(ix) Pricing and the related decisions, and
(x) Analysing and forecasting environmental factors.
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General Tasks :
1. Organizing the resources and uses.
2. Processing the information.
15. USES OF MANAGERIAL ECONOMICS IN
BUSINESS DECISION- MAKING:
Determination of Price of output.
Demand forecasting.
Allocation of resources.
Determination of output level.
Determination of profit margin.
Investment decision making.
Maintenance of Inventories.
Environment analysis etc.
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16. NATURE AND FUNCTIONS OF PROFIT:
Meaning of Profit:
◦ Profit means different for different people like businessman,
accountant, economists, workers etc.
◦ The role and excess of profit differs in different economies as well.
◦ Generally, Profit is the excess of income over expenditure.
◦ Profit includes various economic concepts like opportunity cost, Fixed
and Variable costs, and revenues.
Petersen and Lewis, “ No one will play the game if there is no chance of winning the prize in the
form of profit.”
Dean Joel, “A business firm is an organization designed to make profits, and profits are the
primary measure of its success.”
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17. Business Vs Economic Profit:
Business Profit/Accounting Profit
= TR – Explicit Cost
- Explicit cost is the cost paid for external factors of production.
Economic Profit
= TR- (Explicit +Implicit Cost)
- Implicit Cost refers to the cost incurred for self owned factors of production along
with normal Profit.
Implicit cost = Imputed cost +Normal Profit
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18. Functions of Profit:
o Measurement of performance.
o Incentive for expansion.
o Incentive for new inventions and innovations.
o Ensures future capital.
o Attracts new investor.
o Increases risk bearing capacity.
o Incentive for Research and Development.
o Main Heart of market economy.
o Indicator of success and achievement etc.
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19. Case 1
Akshit a web designer, working as a manager of a web based company for Rs 120000
per year wants to start his own business by investing his own money of Rs. 400000 on
which he could earn 10% interest if deposited in bank. His estimated revenue during
the first year of operation is Rs 300000 and costs are salaries to employees Rs 90000,
supplies Rs 30000, rent Rs.20000 and utilities Rs 2000.
a) what is business profit?
b) what is economic profit?
c) If he seeks your advice on whether to start the business or not what will be your
advice and why?
d) what will be your advice is he could earn only 2% interest on his own money if
deposited in bank?
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20. Case 2
Abhik working in a Bank earning Rs 15000 per month has deposited Rs. 480000 in
bank which yields 5% interest per annum. He wants to invest this money to
establish his own company and works as a manager in his own company. He has
estimated total revenue Rs. 82000 per month and estimated cost of production raw
materials 50000, advertisement 10000, annual depreciation 15%, of capital worth
200000, utilities 3000/month, miscellaneous expenses 8000. Find:
a) Business Profit
b) Economic Profit
c) If Abhik asks your suggestion whether to start business or continue Job. What is
your suggestion and why?
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21. SURVEY OF THEORIES OF FIRM !
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22. Profit Maximization Model:
o Classical Objective – Supported by classical and neoclassical economists.
o According to this objective- “The main objective of firm is to maximize profit.”
o Profit is the major incentive to produce and sell goods and services in the market.
o Each and every business firms aim to maximize the profit with the use of available
resources.
o Profit is the difference between Total Revenue (TR) and Total Cost(TC)
i.e. π = TR-TC
o It means profit will be maximized when the positive difference between TR and
TC will be maximum at a particular level of output.
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23. Assumptions:
1. Only one commodity is produced by the firm.
2. The owner himself works as the manager of the firm.
3. Time period is static.
4. There is existence of imperfectly competitive market.
5. A firm acts rationally, i.e. it always attempts to maximize profit by
investing limited investment budget.
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24. Two approaches of Profit maximization Model:
A. TR-TC Approach:
o According to this approach profit will be maximized when the gap between TR and
TC will be maximum.
o Graphically, when the vertical distance between TR curve and TC curve is maximum,
Profit will be maximum.
o In perfect competition market TR curve is positively sloped straight line starting
from origin and in Imperfect Compeition market/monopoly TR curve starts from
origin, increases at increasing rate at first, increses at decreasing rate, reaches to
maximum point and finally decreases.
o TC curve is Inverse ‘S’ Shaped starting from any point of Y-axis from where TFC
starts.
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27. B.MR-MC Approach:
o It is another alternative approach to explain profit maximization objective of
firms.
o Marginal Revenue(MR) refers to the additional revenue received by the firm by
selling one extra unit of output.
o Marginal Cost (MC) refers to the additional cost incurred in producing one
additional unit of output.
o There are two conditions to be satisfied for firms equilibrium under this
approach, which are:
1. Necessary/First order condition: MR=MC
2. Sufficient /Second Order condition: Slope of MC>Slope of MR or MC curve must
Intersect MR curve from below.
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30. Criticisms of Profit Maximization Model:
1. The model is based on unrealistic assumptions like single entrepreneur, production of
single commodity, etc.
2. Marginalism is very complex concept to determine profit maximizing objective.
3. The firm doesn't have only one objective. Modern firm are multi-goal firms.
4. The theory believes in "survival of the fittest" which is not applicable in production.
5. The structure of modern corporate business, i.e. separation of ownership and
management may divert managers' interest from maximizing profit to maximizing their
own welfare and so on.
6. Policies that tend to maximize profits cause increased risk and instability, which
managers fear. Therefore, risk averse managers avoid a policy of profit maximization.
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31. Case 3
o Tamakoshi Electronics Ltd. has following demand and cost
functions, P = 2000 - 10Q and C = 1000 + 200Q
Calculate,
i) Price (P),
ii) Output (Q),
iii) Total revenue (TR), and
iv) profit (π) under the objective of profit maximization.
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32. Case 4
o A firm has the demand function Q=30-P .
Total fixed cost of the firm is Rs 20 and variable cost
per unit of output is Rs 4.
Then find profit maximizing level of output price and
total profit of the firm.
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33. VALUE MAXIMIZATION MODEL
o Long-run objective of the firm guided by another objective of profit
maximization.
o Designed to solve the weaknesses of short-run profit maximization
objective.
o Solomon and Pringle, "When the time period is short and uncertainty is not much, profit maximization &
value maximization are same."
oL. J. Gitman, "Since share price represents the owner's wealth in the firm, share price maximization is
consistent with owners wealth maximization."
oIn case of organization, value of firm refers to the shareholders wealth which
is measured by the share price of the stock.
oValue maximization model is also expressed as wealth maximization model.
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34. Contd…
o Value can be defined as the present value of the firm's expected future net cash flows.
o Value can be defined as the present value of the firm's expected future net cash flows.
o Value of the firm = Present value of expected future profits (P.V.)
Where,
P.V. present value of expected future profits
1, 2 . . . n mean profit of each year
r rate of discount or rate of interest
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35. Contd…
o Since, profit is the difference between total revenue and total cost. Hence, the eqn. (i)
can be written as
Features of value maximization model:
(1) This model creates direct relationship between profit and managers remuneration
(2) This model is more useful in competitive markets
(3) It provides simple explanation and easy to make managerial decision
(4) It deals with both cost and benefit of the firm in long-run
(5) It also deals with social contribution and benefits.
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36. Superiority of Value maximization model:
Value maximization model is superior than profit maximization model in following
respects:
o Profit maximization model deals with short-term profit maximizing business projects.
Value maximization model deals with long-run profit maximizing business projects and
this model incorporates all these activities including risk analysis.
oProfit maximization model is static model. It is because this model deals the objective
of a firm on the basis of single time period. But, value maximization model is dynamic
model. It is because this model explains the objective of a firm with future risk and
uncertainty on the basis of multi-period.
oProfit maximization model is focused on sole-trading business at which welfare
maximization of single owner is preferred. Value maximization model is focused on
corporate business at which welfare maximization of many shareholders is preferred.
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37. BAUMOL'S THEORY OF
SALES REVENUE MAXIMIZATION
o W.J. Baumol criticized the profit maximization model developed sales-revenue
maximization model through the publications of an article "Business Behavior,
Value and Growth in 1956.”
o ultimate objective of the firm is to maximize sales rather than profit.
o Sales refers to the revenue of the firm therefore he named his hypothesis as
sales maximization hypothesis or revenue maximization hypothesis.
osales maximization means maximizing TR from sales.
oalso supported the view of profit maximization by saying that firms need
minimum profit to spend on expansion plans, make dividend to attract stock
buyers in future spend to increase long-term sales and to provide better return
to the shareholders.
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38. Assumptions:
(1) The time horizon of a firm in a single period.
(2) During this period the firm attempts to maximize its total revenue subject
to a profit constraint not the physical volume of output.
(3) The firm must realize a minimum level of profit to keep shareholders
happy and avoid a fall of share prices.
(4) Cost curves are U-shaped and demand curves are downward sloping.
(5) Market is imperfectly competitive.
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39. Business managers pursue the goal of sales
maximization rather than profit maximization
for the following reasons:
Financial institutions consider sales as an index of performance of the firm and are willing to
finance the firm with growing sales.
Salaries and slack earnings of the top managers are linked more closely to sales than to profit.
Sales growing more than proportionately to market expansion indicate growing market share
and a greater competitive strength and bargaining power of a firm.
Sustained growing sales at large scale gives prestige to the managers, while large profit go into
the pockets of shareholders.
Business stability is the pre-condition for sustained growth of business. Managers thus prefer a
steady performance with 'satisfactory' profits to spectacular profit maximization projects.
Firms can easily handle personnel problems when they have large sales. These firms can have
the capacity to make higher payments with some managerial emoluments to their employees.
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40. Two cases under sales revenue
maximization:
1. Sales revenue maximization without profit constraint:
◦ When firm sets its goal of sales maximization without profit
constraint, it produces the level of output at which TR is
maximum with unitary price elasticity of demand, e = 1.
2. Sales revenue maximization with profit constraint:
o If the Board of Director directed the managers to meet profit
target, firm produces the level of output where TR is increasing
with positive MR and price elasticity of demand, e > 1.
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42. Conclusions of Baumol’s Theory:
o Sales maximizer produces more output than profit maximizer
o Sales maximizer determines low price of the product in comparison
to profit maximizer.
o Sales maximizer obtains low profit in comparison to profit
maximizer.
oSales maximization hypothesis has a better predictive performance
than the traditional profit maximization objective hypothesis.
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43. Criticisms of
Sales-Revenue Maximization Model
(1) It is consistent with profit maximization in long-run.
(2) The firms can sell more than profit maximizing level only due to the ignorance of
their demand curve.
(3) According to J. R. Witdsmith, Boumol's model has unacceptable conclusion.
(4) According to W.G. Shepherd, in case of oligopoly, the equilibrium lies at the
point of kink, under kinked demand curve. Therefore, in such a situation profit
maximization and sales maximization do not become competitive.
(5) It cannot be tested without knowing demand and cost functions of individual
firm.
(6) It doesn't show the process of equilibrium of the industry consisting of all firms
as sales maximizer is attained.
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44. Case 6
Given the total demand function and total cost function
P = 20 – Q
TC = 50 + 4Q
Determine-the price (P), output (Q), total revenue (TR) and profit () under:
(a) Profit maximization model
(b) Sales revenue maximization model
(c) Sales revenue maximization model with profit constraint of Rs 13.
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45. Case 7
o let, demand function, P = 20- 0.2Q, cost function, C= 140 + 4Q
a) Determine output, price and TR that maximize profit.
b) Determine output, price and Profit that maximizes sales.
c) Determine output, price and TR under profit constraint of Rs. 170.
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46. Case 8
o A manufacturing company is operating in Kathmandu valley with the demand function given as
P = 10 ˗ 0.1Q, and the total cost function as C = 70 + 2Q.
If the company wanted to maximize profit, what is the price output combination and the total
profit and revenue? The management of the company realizes the need for capturing market.
Therefore, it started to promote its product with the strategy of sales revenue maximization instead of
profit maximization. What will be the price output combination and total profit under the condition of
sales revenue maximization?
The shareholders of the company did not like market share capture strategy (sales revenue
maximization) followed by the management. The shareholders showed strong dissatisfaction against
the management in its Annual General Meeting. They argued that management should not be given
opportunities for free play in the company. The shareholders' meeting consensually decided to put
restriction with minimum profit of Rs 10. Under this condition, what is the optimum Price (P), output
(Q) combination and total revenue? [TU 2016]
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47. WILLIAMSON'S MODEL OF MANAGERIAL
DISCRETION:
o Oliver E. Williamson developed a full-fledged theory of firm related to managerial
discretion and he believed that the managers look at their self interest while making
decisions of firm.
o Managers have discretion in pursuing policies which maximize their own utility rather
than attempting the maximization of profits which maximizes the utility of the owner-
shareholders.
o Profit acts as a constraint to the manager's utility maximization behavior because the
financial market and the shareholders expect maximum profit.
o The objective of a firm is to maximize their own utility function with profit constraint.
o The job security of managers endangers, if managers fails to earn a minimum profit to
pay in the form of dividends to the owners.
KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU 47
48. Contd…
o Manager’s utility function can be written as,
U = f(S, M, ID)
Where,
U = manager's utility
S = staff expenditure
M = managerial emoluments
ID = discretionary investment
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49. Contd…
Simplified Model:
The model can be expressed as:
Maximize (U) = f(S, M, ID)
Subject to πR > π0 + T
where,
◦ πR is the reported profit (reported to tax office) which is the difference between actual
profit (p) and managerial emolument i.e. πR = π - M, and,
◦ π0 is the minimum profit satisfy the shareholders
The actual profit is the current profit of firm which is the difference between total
revenue (R) and Total cost (C) including staff expenditure i.e. π = R - C – S
KAMAL REGMI, SHANKER DEV CAMPUS KATHMANDU 49
50. Contd…
When managerial emolument M =0, the model can be expressed as:
Maximize (U) = f(S, πD)
Subject to π> π0 + T
We know,
Discretionary profit πD= π - π0 - T,
Also,
Discretionary investment ID = π R - π 0 - T
or, ID = (π - M) - π 0 - T (... π R = π - M)
when M = 0
or, ID = (π - 0) - π 0 - T
or, ID = π - π 0 - T
or, ID = π D
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51. Manager's utility curve
Collection of indifference curves U1, U2, U3 is the manager's utility curve and
shows the preference of manager. Higher indifference curve gives higher utility
to manager.
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52. Relation between discretionary profit and
staff expenditure
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Discretionary
Profit Curve
Point E is the equilibrium where
discretionary curve is tangent to the
manager's utility curve U2. Hence, Se is
the staff expenditure and De is the
discretionary profit. In profit
maximization goal of firm's staff
expenditure would be S and maximum
profit would be DM. This implies that
manager prefers more amount of staff
expenditure as compared to profit
maximizing situation i.e. Se > S.
53. Comparison of Profit maximization, revenue
maximization and managerial discretion models:
o Williamson’s model is based on the implicit assumption "other things remaining the same".
o This model is valid only in the market not having strong rivalry.
o If the market is with strong rivalry, profit maximization is most appropriate.
oWilliamson’s model is practically useful model because this model gives conclusions like
change in discretionary expenditures like staff expenditure, managerial emoluments and,
discretionary investment are the tendencies and the determinants of behavior of a rational
manager.
oThis model also shows the effect of taxes on objective of the firms or utility of the managers,
therefore, it is practically useful model.
o This model deals about reported profit, whereas sales revenue model and profit
maximization model deal about actual profits.
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