Managerial Economics Overview

It's the application of economic principles and analysis to business decision-making.

They are the goals and objectives of a business, such as profit maximization, cost minimization, market share expansion, and customer satisfaction.

Microeconomics focuses on individual economic units like consumers, firms, and industries, while macroeconomics looks at the economy as a whole, encompassing factors like inflation, unemployment, and GDP.

Utility is the satisfaction or pleasure a consumer derives from consuming a good or service. It's subjective, meaning it varies from person to person.

It states that as a consumer consumes more of a good, the additional satisfaction they get from each extra unit decreases.

It involves breaking down economic behaviour into individual units like consumers and firms, focusing on how they make choices and interact with each other.

It can sometimes be too narrow in scope, neglecting broader economic trends and interdependencies.

It deals with the overall economy and aggregates like national output, inflation, and unemployment.

Its implications may not always translate directly to real-world business problems, requiring careful interpretation and application.

An indifference curve shows all combinations of goods that provide the same level of utility to a consumer.

Consumer equilibrium is the point where a consumer maximizes their utility given their budget constraint. This means they're consuming the combination of goods that gives them the most satisfaction, considering their income.

It states that a rational consumer will allocate their spending across goods in a way that the marginal utility per dollar spent is equal for all goods.

A budget line shows all possible combinations of goods a consumer can afford given their income and the prices of the goods.

It focuses on factual statements and relationships between economic variables, without making judgments about what should be.

It involves making value judgments and recommendations about what policies or actions should be taken to achieve certain economic goals.

In this case, the demand for petrol is likely inelastic, meaning that even with a significant price increase, the quantity demanded doesn't decrease much.

It measures the responsiveness of quantity demanded to changes in price. It tells us how much demand changes in percentage terms for every 1% change in price.

It's the relationship between the quantity of a good or service demanded and its price, keeping all other factors constant.

Elastic demand occurs when the change in quantity demanded is greater than the change in price. Inelastic demand is the opposite – a smaller change in quantity demanded compared to the price change.