ManEcon Lesson 1: Macroeconomics and Microeconomics

Economics - study of how scarce resources will be allocated to satisfy the

unlimited needs of human being.
- How people decide or their decision making as an individual considering the
organization, your own personal life, and other aspects that affects you as a
consumer or as a firm.
- Economic theory and economic analysis are used to solve problems of managerial
economics.
- All economic theories, tools and concepts are covered under scope of managerial
economics to analyze business environment.
Scarcity - existed as early as existence of men. This is due to endless
needs of the people contrary to limited resources available.
Manager - should harness the limited resources of organization to achieve
certain goals, subject to both internal and external constraints.
Economists - give advise to manager who may or may not working for profit
making organization.

Managerial Economics - concerned with application of economic concepts and economic

analysis to the problems of formulating rational managerial decisions.
- branch of economics which studies the application of theories, tools, and
findings of economic analysis to managerial decision making in all types of
organizations, including gov. agencies, educational centers, not-for-profit
organizations and business enterprise.
- In short, it uses the knowledge of economics for decision making for the
business or the entity.

MANAGERIAL ECONOMICS AND MAJOR BRANCHES OF ECONOMICS

Macroeconomics - tackles broader and aggregate level. Deals with performance,
structure, and behavior of an economy as a whole.
- Exchange Rates -
- Monetary and Fiscal Policies
- Inflations, Deflations, and Foreign Currencies

Microeconomics - concerns with actions of individuals on their economic

decisions as consumers or being firms.

SCOPE OF MANAGERIAL ECONOMICS

1) Demand Analysis and Forecasting - involves huge amount of decision making
2) Profit Management - success of a firm depends on primary measure which is the
profit.
3) Capital Management - involves planning and controlling of expenses.

BUSINESS FIRMS AND BUSINESS DECISIONS

- it is crucial to profitability, operations, and sustainability of a business
organization.

PRODUCTION - Firms produces the products and services. They get to done producing
products by paying financial expenses, labor, physical resources, capital, land,
and etc.
CONSUMPTION - Households consumes the products and avails services. They are to pay
the products and services they availed and consumed.
GOVERNMENT - They are to regulate the business if they are following the pre-
emptive measures assigned to many of the businesses for the people to consume the
products safely.

STEPS FOR DECISION MAKING

1) Identify problem - what is the needs of the consumers (gap)
2) Determine objectives - what is your goal
3) Discover alternatives - strategies on how to pursue your goal
 4) Forecast consequences - what are the negative or positive effects of your
strategies and be ready for it
5) Make Choice - What is the best way
6) Sensitive Analysis - evaulate effectiveness of the choice implemented

SUMMARY
Managerial Economics - a discipline that combines economic theory with managerial
practice. It helps in covering the gap between problems of logic and problems of
policy.
- Most important function is decision making. It involves complete course of
selecting most suitable action from several alternatives or more.
- close interrelationship between management and economics led to
development of managerial economics.
- Economic analysis is required for demand, profit, cost, and competition.
In this way, managerial economics is considered as economics applied to "problems
of choice" or alternatives and allocation of scarce resources by the firms.
- Primary function is to make most profitable use of resources which are
limited such as labor, capital, and etc.
- Manager is very careful in taking decisions as future is uncertain. He/she
ensures the best possible plans and make decisions in an effective manner to
achieve desired objective (maximization of profit).