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