CQD7001

Economics For Management

Group 1
Tutorial 1
Name Matric No
How Joh Yee S2026832
Sharifah Amalina Binti Syed Ahmad S2124283
Nawal Alwani Binti Mohamed Yussof S2178349
Question 1
What are the differences between the microeconomic and macroeconomic
perspectives on the economy? 

Microeconomic Macroeconomic

Analyzes the decisions of individual

Views the big picture of the economy
consumers, firms and industries. 

When microeconomics is applied to Focuses on the overall level of economic

activity, changes in the price level, and the
business decision making, it is called amount of unemployment by analyzing
managerial economics  group or aggregate behavior in different
sectors of the economy

Changes in the overall level of

economic activity create new
opportunities and challenges for firm
Question 2
Why are both input and output prices important to managers?

• Products sold by a firm

Output • Output prices influence revenue

• Resources (such as land, labor, capital, raw

Input materials, and entrepreneurship)
• Influence cost of production
Question 3
What are the four major types of markets in microeconomic analysis?

Perfect Monopolistic Oligopoly Monopoly

Competition Competition
Large number of firms in Large number of small Small number of large Single firm producing a
an industry  firms  firms product
Undifferentiated Differentiated products No close substitute
product product

Ease of entry into the Market power can be Must take rivals’ Entry Barriers (licenses,  
market competed away over actions into account legal or structural)
time when developing their
own competition
strategies
Complete information - - Market power with no
available to participants consideration of rivals
Agriculture product Fast food restaurant: Telco Service Provider: TNB
KFC, McDonald Maxis, Celcom, Digi
Question 3
What are the key characteristics that distinguish these markets?

2. Whether the
3. Whether entry into 4. The amount of
1. The number of products sold in the
the market by other information available
firms competing with markets are
firms is easy or to market
each other, differentiated or
difficult, participants.
undifferentiated,
Question 4

Since a monopolist has some degree of market power, and can also take measures to keep competitors away from the market, a
monopolist can set the price of their product as high as they want. The higher the price charged, the higher the revenue. Do you
agree? Explain your answer.

• Not agree
• Monopolist can charge any price for its product, that price is nonetheless constrained by demand for the firm’s product.  
• The monopolist can either choose a low price (Pl) and high quantity (Qh), or a high price (Ph) and a low quantity (Ql), or some
intermediate point. 
• Setting the price too high will result in a low quantity sold, and will not bring in much revenue. 
• Setting the price too low may result in a high quantity sold, but because of the low price, it will not bring in much revenue
either. 
• The challenge for the monopolist is to strike a profit-maximizing balance between the price it charges and the quantity that it
sells.
 QUESTION 5
In macroeconomics, what are the five major categories of spending that make up GDP?
Are all five categories added together to determine GDP?

C I G F GDP
(X-M)

Government
Consumption Spending Investment Spending Net Export Spending Gross Domestic Product
Spending
Total amount of Total amount of Total amount of X = Export Spending A comprehensive
spending by household spending by firm  spending by federal, M = Import Spending measure of overall
sector sector state & local economic activity
Total amount of
government
spending on exports
minus the total
amount of spending
on imports
QUESTION 6
Discuss the differences between fiscal & monetary policies.

MONETARY POLICIES FISCAL POLICIES

DEFINITION – What?
Policies that involve changes in taxing & spending. These decisions are
Policies that influence consumer & business spending.
made by the political institutions in the country.

ISSUER – Who?
Central bank National government
Ex : Bank Negara Malaysia Ex : Ministry of Finance Malaysia

PURPOSE – Why?

To promote growth by controlling the money supply. To stimulate or restrain the economy by loosen or tighten the policy.

METHOD – How?

• Providing funds to state & localities

      Ex : Aid for education & support for transportation projects.
• Lowering the interest rate • Supporting people in need
      Ex : Extending unemployment benefits
• Lowering bank reserve requirements
• Purchasing goods & services
      Ex : Construction & investment
• Providing temporary tax relief