BAM 040 Managerial Economics SAS Module 1 PDF

BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________...

BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ N SAS - Module #1 References: IO Lesson title: Orientation and Introduction to Managerial Economics Essential Foundations of Economics Lesson Objectives: by Mark Rush Managerial AT Economics Business 1. I am well knowledgeable about flexible learning setup. Strategy Ninth Edition by 2. I can economics and explain the kinds of questions that Baye,Prince,2017 C economist try to answer. U 3. I can explain the ideas that define the economic way of thinking Materials: ED Construct attainable schedule for your study. A Set your “Start Doing” and “Stop Doing” M activities. IN PH A. LESSON PREVIEW/REVIEW 1) Introduction (10 min) F O Congratulations buddy! You are now officially enrolled in BAM 040 Managerial Economics subject. Let’s make this semester exciting and challenging for you yet a fruitful one through acquiring knowledge and TY ideas about the subject. But before that, I will set our house rules to guide you in and out of our class. R PE O PR 1This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ HOUSE RULES N 1. Use your “real” name in your Facebook account. This will help your class advisers and subject IO teachers in adding you to your group chats. AT 2. Read the course outline for this subject. 3. Ensure that you list your name on the seat plan form. This will be used for easy contact tracing. C 4. Attend our class regularly. Be punctual. U 3. Remove distractions while we are having our class discussions. Be focus! ED 5. Organize your portfolio properly. 6. Inform your subject teacher/s whenever you need to be absent in the class unless there is an emergency. A M IN B.MAIN LESSON 1) Activity 2: Content Notes (20 min) PH You can highlight important words or phrases related to the topic. What is Economics? F Economic exist because of scarcity, the point that wants exceed the ability of resources to satisfy O them. Economics is the social science that studies the choices that individuals, businesses, government, and entire societies make as they cope with scarcity, the incentives that influence those TY choices, and the arrangements that coordinate them. The field of economics is divided into Microeconomics, the study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments, and R Macroeconomics, the study of the aggregate effects on the national economy and global economy of PE the choices of the individuals, businesses, and government make. Economics studies how choices wind up determining what goods and services get produced? How O goods and services are produced?; and for whom goods and services are produced? Economics also studies when choices made in a person’s self-interest serve the social interest. For PR instance, do the self-interested choices made about globalization, the information age, climate change and social security also promote the social interest? What is Managerial Economics? 1. Managerial economics is a stream of management studies which emphasises solving business problems and decision-making by applying the theories and principles of microeconomics and macroeconomics. It is a specialised stream dealing with the organisation’s internal issues by using various economic theories. 2This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ 2. According to Baye, managerial economics is the study of how to direct scarce resources in the way that most efficiently achieves a managerial goal. In line with this, a manager is seen as a person N who directs resources to achieve a stated goal. IO 3. According to Salvatore(2004), managerial economics is described as the application of economic theory and the tools of analysis of decision science to examine how an organization can achieve its aims AT or objectives most efficiently. 4. Managerial economics is defined as the utilization of managerial skills in the business by applying C economic theories and concepts to maintain efficiency in costing and production and its effectiveness on U every decision making by the firms to fully maximize their profits. ED The Nature of Managerial Economics Problems for Managerial Decision-Making A M IN Economic Theory Decision Sciences PH Microeconomics Mathematical Economics F O Managerial Economics TY Application of Economic Theory R PE Optimal Solution O Managerial Decision Making PR Basic Principles of Effective Management 1. Identify goals and constraints. 2. Recognize the nature and importance of profits. 3. Understand incentives. 4. Understand markets 5. Recognize the time value of money. 3This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ Ideas that define the Economic Way of Thinking. The six ideas that are the core of economic approach: a choice is a tradeoff; people make rational N choices by comparing benefits and costs; benefit is what you gain from something; cost is what you must give up to get something; most choices are “how much” choice made at the margin; and choices IO responds to incentives. Choices are tradeoffs - giving up one thing to get another. A rational choice uses the available resources to most effectively meet the objective of the person making the choice. AT The benefit from something is the gain or pleasure it brings. Benefit is measured by what someone is willing to give up to get something. The opportunity cost of something is the best thing that must be C given up. Making choices on the margin means comparing all the relevant alternatives systematically and the incrementally to determine the best choice. The marginal cost is the opportunity cost of a one- U unit increase in an activity; the marginal benefit is the gain from one-unit increase in and activity. ED Rational choices compare the marginal benefit of an activity to its marginal cost and undertake it if the marginal benefit exceeds or equals the marginal cost. Statements about “what is” are positive statements; statement about “what ought to be” are normative statements. Economist are interest in positive statements about cause and effect so they develop economic models. Economists are natural A experiments, statistical investigations, and economic experiments to test if their models are making M correct predictions. IN 2) Activity 3: Skill-Building Activities (30 mins.) Part 1. PH Practice Problem I. 1. Which of the following headlines deals with what, how for whom questions? A. A new government program is designed to provide high-quality school lunches for children F from poor families O B. Intel researchers discover a new chip-making technology. TY C. Jewel Hairstyling sets a record for hairstylings in the month of July. 2. Which of the following headlines concern social interest and self interest? A. A new government program is designed to provide high-quality school lunches for children R from poor families PE B. Intel researchers discover a new chip-making technology. C. Jewel Hairstyling sets a record for hairstylings in the month of July. O PR Solutions to Practice Problem I 1A. “More lunches” is a what question and “fir children from poorer families” is a for whom question 1B. “New chip-making technology” is a how question because it deals with how computer chips will be maintained. 1C. “Record for hairstylings” is a what question because it notes that a record number of hairstylings have taken place in July 2A. The decision to implement a new government program is a decision that is most likely made in the social interest. The self-interest of the government bureaucrat who made the decision might also be interested particularly if the bureaucrat also will help manage the program. 2B. Intel’s decision to research new chip-making technology is made in Intel’s self-interest. 4This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ 2C. Jewel’s decision to offer hairstylings is made in its self-interest as are the decision of the people who had their hair styled by Jewel. N Practice Problem I. 1. What are the opportunity cost of using this Student Activity Sheet (SAS) Module? IO 2. Kate usually plays tennis for two hours a week and her grade on each math test is usually 70 percent. Last week, after playing two hours of tennis, Kate thought long and hard about playing for AT another hour. She decided to play another hour of tennis and cut her study time by one additional hour. But the grade on last week’s math test was 60 percent. C a. What was Kate’s opportunity cost of the third hour of tennis? b. Given that Kate made the decision to play the third hour of tennis, what can you conclude about U the comparison of her marginal benefit and marginal cost of the second hour of tennis? c. Was ED Kate’s decision to play the third hour of tennis rational? 3. Classify each of the following statements as positive or normative. a. There is too much poverty in the United States. b. An increase in the gas tax will cut pollution. A M c. Cuts to social security in the United States have been too deep. IN Solutions to Practice Problem I 1. The opportunity cost is mainly the time spent using the SAS Module because that time could be PH devoted to other activities. The best activity given up, be it studying for another class, or sleeping, or some other activity, which is lost because of the time spent using the SAS Module is the opportunity cost. Once you have purchased this SAS Module, its price is not an opportunity cost of using the SAS F Module because you have already paid the price. O 2a, The opportunity cost of the third hour of tennis was the 10 percentage point drop on hr math test grade because she cut her studying time by one hour to play an additional hour of tennis. If Kate had TY not played tennis for the third hour, she would have studied and her grade would not have dropped. 2b. Kate chose to play the third hour of tennis, so the marginal benefit of the third hour of tennis was R greater than the marginal cost of the third hour. If the marginal benefit of the third hour of tennis was PE less than the marginal cost of the third hour, Kate would have chosen to study rather than play tennis. 2c. Even though her grade fell, Kate’s choice used the available time to most effectively satisfy her O wants because the marginal benefit of the third hour of playing tennis exceeded the marginal cost of the third hour. The choice was made in her self-interest. PR 3a. A normative statement because it depends on the speaker’s value and cannot be tested. 3b. A positive statement because it can be tested by increasing the gas tax and then measuring the change in pollution. 3c. A normative statement because it depends on the speaker’s values (someone else might propose still deeper cuts) and cannot be tested. 5This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ Part II. Self-Test 1.1 N I. Fill-in the blanks. Select from the word or phrase of words inside the parenthesis that will correctly complete the statements. IO Economics questions arise because __________ (human wants; resources) exceed the __________ (human wants; resources) available to satisfy them. Faced with __________ (problem; scarcity), people AT must make choices. __________ (Macroeconomics; Microeconomics) is the study of the choices the individuals and business make and the way these choices interact and are influenced by governments. Choices that are the best for the person who makes them are made in _________ C (self-interest; social interest). U ED A __________ (rational; irrational) choice uses the available resources to most effectively satisfy the wants of the person making the choice. The opportunity cost of an activity is __________ (all of the activities given up; the best alternative given up). the benefit of an activity is measured by what you __________ (willing to; must) give up. We make a rational choice to do an activity if the marginal A benefit of the activity __________(less than; exceeds) the marginal cost. A statement that tells “what is” M is a __________(positive; normative) statement. A statement that tells “what ought to be” is a __________ (positive; normative) statement, IN II. True or False. Write the word “True: before the number if you think the statement is correct, PH otherwise write “False” 1. Faced with scarcity, we must make choices. 2. The question of what refers to what production method should a firm use? F 3. The answers to the what, how and for whom questions depend on the interactions of the choices O people, businesses and governments make. 4. If Sam buys a pizza because she is hungry, her choice is made in the social interest. TY 5. Because everyone is a member of society, all choices made in self-interest are also in social interest. 6. Instead of attending his accounting class for two hours, Jim can play a game of tennis or watch a movie. For Jim the opportunity cost of attending class is forgoing the game of tennis and R watching the movie. PE 7. Marginal cost is what you gain when you get one more unit of something. 8. A rational choice involves comparing the marginal benefit of an action to its marginal cost. 9. A change in marginal benefit or change in marginal cost brings a change in the incentives that we O face and leads us to change our actions. The statement, “When more people volunteer in their communities, crime rates decreases” is a PR 10. positive statement. III, Short Answer and Numeric Questions. On the space/box provided, briefly answer the following questions. 1. Will there ever come a time without scarcity? 2. If there was no scarcity, would there be a need for economics? 3. Explain the difference between microeconomics and macroeconomics. 4. What are the three major questions answered by people’s economic choices? 6This document and the information herein is the property of PHINMA Education.  BAM 040: Managerial Economics SAS Module #1 Name:______________________________________________________________ Class number: _______ Section: ____________ Schedule:_____________________________________ Date:_______________ 5. Why is the distinction between choices made in self-interest and choices made in social interest important? N 6. You have P120 and can buy a pizza, a book, or a sketch pad for drawing. You decide to buy the pizza and think that if you hadn’t been so hungry, you would have purchased the book. What is the IO opportunity cost of pizza? 7. What is benefit and how is it measured? AT 8. What is marginal cost? A marginal benefit? How do they relate to rational choice? C U ED A M IN PH C. LESSON WRAP-UP F 1) Activity 5: Thinking about Learning (5 mins) A. Work Tracker O Congratulations! You are done with our first session! Let’s track your progress. Shade the session number you just completed. TY R PE B. Think about your Learning 1. What is the most important lesson you gained on this session? O __________________________________________________________________________________ PR _________________________________________________________________________________ 2. What will you do next session to maintain or improve your performance? __________________________________________________________________________________ __________________________________________________________________________________ FAQ 1. Who was the father of Economics? Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the father of modern economics. His most notable contribution to the field of economics was his 1776 book, “An Inquiry into the Nature and Causes of the Wealth of the Nations.” 7This document and the information herein is the property of PHINMA Education.