Managerial Economics Business strategy Chapter 1 The Fundamentals of Managerial Economics Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics & Business Strategy Chapter 1 The Fundamentals of Managerial Economics
Overview I. Introduction II. The Economics of Effective management a Identify goals and Constraints a Recognize the role of profits a Understand Incentives Understand Markets Recognize the Time value of money Use Marginal analysis Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Overview I. Introduction II. The Economics of Effective Management Identify Goals and Constraints Recognize the Role of Profits Understand Incentives Understand Markets Recognize the Time Value of Money Use Marginal Analysis
Managerial economics Manager a person who directs resources to achieve a stated goal Economics The science of making decisions in the presence of scare resources Managerial Economics The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics • Manager A person who directs resources to achieve a stated goal. • Economics The science of making decisions in the presence of scare resources. • Managerial Economics The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal
Economic Vs Accounting Profits Accounting Profits a Total revenue(sales) minus dollar cost of producing goods or services a Reported on the firms income statement Economic profits otal revenue minus total opportunity cost Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Economic vs. Accounting Profits • Accounting Profits Total revenue (sales) minus dollar cost of producing goods or services Reported on the firm’s income statement • Economic Profits Total revenue minus total opportunity cost
Opportunity Cost ° Accounting Costs The explicit costs of the resources needed to produce produce goods or services a Reported on the firms income statement Opportunity Cost a The cost of the explicit and implicit resources that are foregone when a decision is made Economic profits Total revenue minus total opportunity cost Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Opportunity Cost • Accounting Costs The explicit costs of the resources needed to produce produce goods or services Reported on the firm’s income statement • Opportunity Cost The cost of the explicit and implicit resources that are foregone when a decision is made • Economic Profits Total revenue minus total opportunity cost