Managerial Economics Notes:

Managerial Economics Defined:

Price Quantity
0 40
1 45
2 30
3 30

Or graph:
Y=ax+b
What is the goal of a firm? To maximize its profits regarding to a
shareholder.
As for the manager, we care about the growth of the company.
Theory of a firm:
We are going to see how we are going to differentiate between a
shareholder and a manager.
Definitions of Profit:
Opportunity cost=The money I paid for this share could be used for
other thing, so what is the best alternative for me.
What we are giving up, instead of going to work we are attending 3
days EMBA course.
Another example, spending 2 hours in the afternoon to teach your
children a course of Math, opportunity cost giving up 2 hours of sports
of whatever I could have done.
Everything has an opportunity cost.
The explicit cost= out of pocket money
Implicit cost= what I gave up, cost of scarification.
Function of Profit:
Allocation of society ’s resources:
our resources are scared, and not available in the quantity we want.
What to produce, how we produce it and for whom we are going to
produce.
Why? because our resources are scarred.
What are the needs of my society?
How I am going to produce
For whom?
Example:
Produce a Lamborghini car.
How? Do I have enough steel, enough rubber, enough glass, enough
whatever?
Do I have enough material?
And for whom am I going to produce it? For the whole society, for the
majority? or for the minority.
We call these 3 questions the basic proud of economy.
Hitler
Produce food or guns
Resources are scarce
Food guns
0 15
1 14
2 12
3 9
4 5
5 0

This table can answer my question.

Food or guns.
If no food at all can use all my resources to produce guns
1 food give up 1 production of guns
One extra food, giving up 2 guns
One extra food, giving up 3 guns
One extra food, giving up 4 guns
One extra food, giving up 5 guns
Increasing opportunity cost.

Why? because my resources are scared.

Law of Demand:
Iza kilo strawberry beshtere etc… hasab ade byenzal beshtere l
kilograms
Scarcity of Information: