Refers to the application of economic theory on the tools of analysis of decision science to examine how an organization can achieve its aims or objectives most efficiently

Managerial decision problems

Two types of economic theory

Two types of decision sciences

Application of economic theory and decision science tools to solve managerial decision

The organization can solve its management decision problems by the application of _______ and the tools of _______

Refers to microeconomics and macroeconomics

It is the study of economic behavior of individual decision making units, such as individual consumers, resource owners, and business firms, in a free enterprise system

Is the study of the total or aggregate level of output, income, employment, consumption, investment, and prices for the economy viewed as a whole

Is also related to Decision Sciences

This use the tools of mathematical economics and econometrics to construct and estimate decision models aimed at determining the optimal behavior of the firm

Is used to formalize the economic models postulated by economic theory

Then applies statistical tools to real world data to estimate the models postulated by economic theory and for forecasting

Is the centerpiece and central theme of managerial economics

Is an organization that combines and organizes resources for the purpose of producing goods and services for sale

A FIRM may include ____

It may include proprietorship, partnership, and corporation.

It exists because it would be very inefficient and costly for entrepreneurs to enter into and enforce contracts with workers and owners of the capital, land, and other resources for each separate step of the production and distribution process.

It exists in order to save on such transaction costs.

By internalizing many transactions, it also saves on sales taxes and avoids price controls and other government regulations that apply to transactions among firms.

To purchase resources or inputs of labor services, capital, and raw materials in order to transform them into goods and services for sale

Then use the income generated from the sale of their services or other resources to firms to purchase the goods and services produced by firms

Limitations on the availability of essential inputs

Limitations on factory and warehouse space

Limitations on quantity of capital funds available for a given project or purpose

Legal constraints

Limitations On The Theory Of The Firm

Who created the Sales Maximization Model?

William Baumol created the ____.

Managers of modern corporation seek to maximize sales after an adequate rate of profit has been earned to satisfy stockholders.

Assumes that firms aim to maximize total sales subject to a minimum profit constraint.

With the advent of the modern corporation and the resulting separation of management from ownership, managers are more interested in maximizing their utility, measured in terms of their compensation, the size of their staff, extent of control over the corporation, lavish officers that in maximizing corporate profits

With the advent of the modern corporation and the resulting separation of management from ownership, managers are more interested in maximizing their utility.

Refers to the conflict in interests and priorities that arises when one person or entity takes actions on behalf of another person or entity

Because of the great complexity of running the large modern corporation—a task often complicated by uncertainty and the lack of adequate data—managers are not able to maximize profits but can only strive for some factory goal in terms of sales, profit, growth, market share and so on

Who created the Model of Management Utility Maximization?

Richard Cyert, James March, and Herbert Simon created the?

Oliver Williamson created the?

Who created the Satisficing Behavior?

The two nature and functions of profits

Refers to the revenue of the firm minus the explicit or accounting costs of the firm

The actual out of the pocket expenditure of the firms to purchase or hire the inputs it requires for production

Equals to revenue of the firm minus its explicit costs and implicit cost

Refer to the value of the inputs owned and used by the firm in its own production processes

Theories of profit

Above normal returns are required by firms to enter and remain in such fields as petroleum exploration with above average risks

Similarly, the expected return on stocks has to be higher than on bonds because of the greater risk of the former

It arise as a result of friction or disturbances from long run equilibrium

Profits arise as a result of friction or disturbances from long run equilibrium

That is, in long run, perfectly competitive equilibrium, firms tend to earn only a normal return or zero economic profit on their investment

At any time however, firms are not likely to be in long run equilibrium and may earn a profit or incur a loss

Some firms with monopoly power can restrict output and charge higher prices than under perfect competition, thereby earning profits

Because of the restricted entry to the industry these firms can continue to earn profits even in the long run

Economic profit is the reward for the instruction of a successful innovation

If the average firm tends to earn only a normal return on its investment in the long run, firms that are more efficient than the average would earn above normal returns and economic profit

Serves a crucial function in a free enterprise economy

Signal that consumers want more of the output of the industry

Provide the incentive for firms to expand output and more firms to enter the industry in the long run

Signal that consumers want less of the commodity and/or that of production methods are not efficient

Provide the incentive for firms to increase their efficiency and produce less of the commodity and for some firms to leave the industry for more profitable ones

It therefore provide the crucial signals for the reallocation of societies resources to reflect changes and consumers taste and demand over time

Is defined as a commodity or service being in short supply, relative to its demand

Shortage or being short in supply

It naturally occurs in the society because human wants and needs are UNLIMITED

If society's demand exceeds the available resources, there is now a problem of resource allocation due to ____

It is central in studying economics

It is a science that deals with the management of scarce resources

It is the study of how society allocates scarce resources and goods

It is the scientific study on how individuals and the society make choices

It is the study of the problem of using available economic resources as efficiently or possible to attain the maximum fulfillment of societies unlimited demand for goods and resources

Two greek words for the origin of the term ECONOMICS

OIKOS means

NOMUS means

It means meaning household

It means system of management

OIKONOMIA or OIKONOMUS means

It means management of household