While managerial economics is the application of Economic Theory and Decision Sciences in solving the managerial problems faced by the society. We could see the relationship between economics and managerial economics when we use economic analysis in making business decisions for choosing the best choice for the organization in achieving the objective of the organization. 2 Managerial economics uses the theories of economics and the methodologies of the decision sciences for managerial decision-making.
Elaborate. Managerial decision-making arises due to the problems faced by the organizations in achieving its objectives.
Managerial decision problems like the amount of products that is needed to be reduced, the type or kind of product to be produced, the technique or method of producing a product, the price of product, strategies needed to maximize the profit of the organization and other problems have to be solved in order to achieve the organization’s goals.
The process of managerial decision-making applies both economic theory and the tools of decision science in solving these problems where economic theories seek to predict and explain the economic behavior of the problem and decision science uses the tools of 3 Identify the areas of decision making where managerial economics prescribes pacific solutions to business problems 4 Write short notes on the following: a) Opportunity cost Opportunity cost or also known as the economic cost is the value forgone in order to pursue another alternative which is the second best alternative.
For example, an accountant decided to quit his job to open his own bookstore. The salary that he would had obtain if he did not open a bookstore is called an opportunity cost. B) Marginal Analysis Finding out the change in the total arising because of one additional unit. E. G. Marginal revenue: the change in total revenue due to one additional unit old marginal cost: the change in total cost on account of one additional unit produced Marginal analysis is often used as a tool in decision-making to obtain optimal solution and help them in maximizing their profits.
The most common one which is the profit minimization rule is c) Discounting 5 Explain the theory of profit minimization. Marginal Revenue Marginal Cost 6 Which concept (between business profit and the economic profit business) provides more appropriate basis for evaluating business operations? Why? 7 Some textbooks emphasize on the goal of the firm is to maximize profits. Is this the same thing as maximizing shareholder wealth ? Why and why not? 8 Explain the principal-agent problem for large corporations and explain why the conflict between profit minimization and and sales minimization might be a principal-agent problem. Discuss the differences between profit minimization and shareholder wealth minimization. 10 a) What is the shape of the marginal revenue curve if the total revenue curve has a concave shape?
Cite this Economic Theory and Decision Sciences
Economic Theory and Decision Sciences. (2018, May 26). Retrieved from https://graduateway.com/assignment-115/