NAME: AISLIN FAITH G.

SABUSAP CLASS CODE: ECON104A_A

ACTIVITY: THE WEB DATE: 08/20/21

Demand

Cost

Capital

Profit

The four additional economic concepts that I can connect to Managerial Economics are
Demand, Cost, Capital, and Profit. I have included these four concepts because they are
all discussed under the scope of managerial economics.

Demand is an economic principle about a consumer’s desire to purchase goods and

services and willingness to pay a price for a specific good or service. Demand is
connected to managerial economics because a clear and accurate estimation of demand
ensures a firm’s continuous efficiency. Managers can decide on the production after they
analyze the external factors affecting the demand for a product. Upon estimating the
current demands, managers can then predict the product’s future demands. This would
allow the management to capitalize on the obtainable opportunities and strengthen the
firm’s market position.

Cost on the other hand is the price paid for a product. This is an economic sacrifice
measured in terms of a standard monetary unit incurred as a result of a business decision
to achieve a specific objective. Through the help of managerial economics, a company’s
management can identify the factors that cause a variation in costs. This estimation of the
cost would greatly help the company in their decision making like pricing a product.

The third is capital which refers to the funds employed to finance fixed assets used in
production. This is an essential component of running day-to-day business operations
and financing its future growth. From an economists’ perspective, capital is the key to the
functioning of any unit, whether that unit is a small business, a large corporation, or an
entire economy. Economists also look at the capital of a unit to evaluate how efficient it is
in utilizing its resources.

And lastly, profit in the market economy is the most significant incentive for business
organizations to produce goods and services. Profit maximization from its operation is
the motive of every business organization. The concept of profit has several key
functions in managerial economics, and in managerial performance and business
management, profit is always taken as the motivation to do more and invent more. Profit
is also considered as the reflection of a company’s success, it all rolls down to profitability.