managerial economics in a global economy.pptVIP

by Assoc. Prof. Sami Fethi Outline: What You Will Learn . . . Definition of Managerial Economics Examine the Theory of the Firm The Nature of Profits Business Ethics The International Framework of Managerial Economics Managerial Economics and the Internet Managerial Economics Defined The application of economic theory and the tools of decision science to examine how an organization can achieve its aims or objectives most efficiently. The meaning of this definition can be best examined with aid of figure below: Microeconomics: This subject is the study of the economic behaviour of individuals decision-making units such as individual consumers, resources owners and business firm in the free enterprise system. ???? Macroeconomics: On the other hand, this subject is the study of the total or aggregate level of output, income, employment, consumption, investment and prices for the economy viewed as a whole. Microeconomic theory of firm Although the microeconomic theory of firm is the single most important element in the managerial economics, the general macroeconomic conditions of the economy (i.e. the level of aggregate demand, rate of inflation, and interest rate) in which the firm operates are also very important. The theory of firm The theory of firm assumes that the firm seeks to maximize profits and minimize cost and on the basis of that it predicts how much of a particular commodity the firm should produce under different forms of market structure or organization. Theory of the Firm Combines and organizes resources for the purpose of producing goods and/or services for sale. Decision Sciences Managerial economics is very closely related to the decision sciences. These use the tools of mathematical economics and econometrics to construct and estimate decision models aimed at determining the optimal behavior of the firm (i.e. how the firm can achieve its goals most efficiently). ? Mathematical Economics and Econometrics Mathematical Economics especially is u