Manegrial Economics en 001

Dr.
Abdelhalim Mahmoud
01281407407
‫عبدالحليم محمود صالح‬
[email protected]
abdelhalim saleh
• Economics is the science of making decisions in the presence of scarce
resources.
• Economics is the social science that examines how individuals,

institutions, and society make optimal choices under conditions
of scarcity
• Economics is the study of how societies use scarce resources to

produce valuable commodities and distribute them among
different people
• Economics is the science which studies human behavior as a

relationship between ends and scarce means which have alternative
uses
Economic Problem
Scarce
resources
Unlimited
Needs
It is important that an economy make the best use of its limited resources.
That brings us to the critical notion of efficiency.
Efficiency denotes the most effective use of a society’s resources in satisfying
people’s wants and needs.
MacroEconomics MicroEconomics
examines the performance is the part of economics

of the economy as a whole. It concerned with
focuses on economic growth, decision making by
the business cycle, inflation, individual customers,
and major economic workers, households,
aggregates and business firms.
Managerial Economics Managerial Micro Micro Economics
Prescriptive Economics Economics Descriptive

Management is how businesses
organize and direct workflow,
operations, and employees to meet
company goals.
The primary goal of management is
to create an environment that lets
employees work efficiently and
productively.
Managerial Economics therefore, is the study of how to direct
scarce resources in the way that most efficiently achieves a
managerial goal
Management Managerial Economics

Economics
Technical efficiency :
refers to producing output with the minimum
possible inputs.
Technical efficiency alone, however, does not imply
that scarce resources are being well used.
Economic efficiency :
providing an item at the minimum possible cost. considers the
cost of inputs used in the production process.
Technical efficiency is necessary for economic efficiency, but it does

not guarantee it.
Choosing production techniques:
Labor Intensive Capital Intensive

Factors Influencing management decision when
choosing production technique:
1- Institution goals & strategy:

• Capital intensive Vs. Labor intensive.
• Long term profitability Vs. short term.
• Environment friendly.
2- Market characteristics:
• Market volume
• Types of products.
• Competition.
3- Economic Policies:
• Fiscal policy
• Monetary policy
• Trade policy.
Encourage institutions to follow specific paths or activities

What is the goal of the Manager?
The general goal for the managers is to maximize
the Value of the Firm (profit maximization).
What is the profit ??!

Economic Profit Accounting Profit
Accounting profits are the total amount of money taken in from sales (total revenue, or
price times quantity sold) minus the dollar cost of producing goods or services.
Economic profits are the difference between the total revenue and the total
opportunity cost of producing the firm’s goods or services.
When economists speak of profit, they mean profit over and above what the owner’s
labor and capital employed in the business could earn elsewhere
Example:
Some one decided to quit his job, which paying him annual salary 60000 LE, and run his
own startup. He invested his savings which return was 25000 L.E.
At the end of year he achieved profits equal 100,000. L.E.
Economic Profit Accounting Profit

Revenues: Revenues:
Deduct: Deduct:
Explicit cost Explicit cost
Implicit Cost (opportunity cost)
Labor opportunity cost 60000
Savings opportunity cost 25000
15,000 L.E 100,000 L.E

REASONS FOR THE EXISTENCE OF PROFIT
• Innovation
IPhone considered pioneering product. It
pushes the frontier relative to existing products in
terms of functionality, technology, and style.
These managerial efforts generates high profits.
Future value depends on how each managerial
team executes its strategy.

• Risk
A hallmark of managerial decision making is the need to make risky choices.
For managers this risk takes many forms.
• They are asked to make decisions whose future outcomes are
unknown (How successful will this product be in the market?),
• when they don’t know the reactions of rivals (If I raise my price, will
my rivals raise theirs?),
• and when they do not know the likelihood of a future event
Profit is the reward to those who bear risk well.

• Risk
A hallmark of managerial decision making is the need to make risky choices.
Profit is the reward to those who bear risk well.

• Market Power:
A firm’s ability to raise price without losing all sales.
managers also earn profit by exploiting market inefficiencies.

Good managers understand how to create these
to give their firm a sustainable competitive advantage.
• Common tactics in this area include:
• building market entry barriers,
• sophisticated pricing strategies
• diversification efforts and output decisions.
Such tactics, if done well, can generate a long stream of profit.

Economic Policies
Fiscal Policy
Monetary
Policy
Foreign Trade
Policy
Fiscal
Policy
State Budget
Public Public
Expenditure Revenue
Wages & Salaries
Taxes
Subsidize
Other Revenues
Investment
• Sales Tax vs. VAT
• Minimum wage
• Tax brackets & tax rates
• Subsidized categories
• Fees of Governmental services
• Public Investment Plan
Monetary policy
• Monetary policy is a set of actions to
control a nation's overall money supply
and achieve economic growth.
• Monetary policy strategies include
revising interest rates and changing
bank reserve requirements.
• Monetary policy is commonly classified
as either expansionary or contractionary.

Trade Policy
A trade policy is a government policy that
affects the number of goods and services
a country exports and imports. Free trade
is when there are no government
restrictions on trade. Protectionism is
when governments set trade restrictions
to help domestic industries

Markets bring together buyers (“demanders”) and sellers (“suppliers”).
A market is a mechanism by which buyers and sellers interact to
determine the price and quantity of a good or service.

Manegrial Economics en 001

Uploaded by

Copyright:

Available Formats

Manegrial Economics en 001

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Manegrial Economics en 001

Uploaded by

Copyright:

Available Formats

Dr.

‫عبدالحليم محمود صالح‬

• Economics is the social science that examines how individuals,

• Economics is the study of how societies use scarce resources to

• Economics is the science which studies human behavior as a

examines the performance is the part of economics

Prescriptive Economics Economics Descriptive

organize and direct workflow,

operations, and employees to meet

The primary goal of management is

to create an environment that lets

employees work efficiently and

Management Managerial Economics

Technical efficiency is necessary for economic efficiency, but it does

Labor Intensive Capital Intensive

1- Institution goals & strategy:

Encourage institutions to follow specific paths or activities

What is the profit ??!

Economic Profit Accounting Profit

15,000 L.E 100,000 L.E

IPhone considered pioneering product. It

pushes the frontier relative to existing products in

terms of functionality, technology, and style.

These managerial efforts generates high profits.

Future value depends on how each managerial

team executes its strategy.

Profit is the reward to those who bear risk well.

Profit is the reward to those who bear risk well.

managers also earn profit by exploiting market inefficiencies.

Such tactics, if done well, can generate a long stream of profit.

control a nation's overall money supply

and achieve economic growth.

• Monetary policy strategies include

revising interest rates and changing

bank reserve requirements.

• Monetary policy is commonly classified

as either expansionary or contractionary.

affects the number of goods and services

a country exports and imports. Free trade

is when there are no government

restrictions on trade. Protectionism is

when governments set trade restrictions

to help domestic industries

A market is a mechanism by which buyers and sellers interact to

determine the price and quantity of a good or service.

You might also like