THEME FOR ECONOMIC ANALYSIS

FOR MANAGERS

ECONOMIC EFFICIENCY
FOR ENSURING
COMPETITIVENESS
WHAT DO MANAGERS DO?
DEVELOP POLICIES & GOALS FOR
ORGANIZATION

DEVELOP STRATEGIES FOR
ACHIEVING GOALS

ACQUIRE NECESSARY RESOURCES

ORGANISE AND DIRECT THESE
RESOURCES


HOW DOES ECONOMICS ANALYSIS FITS
IN FOR MANAGERS?
ECONOMICS ANALYSIS PROVIDES A
MACRO/MICRO VIEW OF HOW BEST
RESOURCES ARE USED.

THIS WOULD MEAN LOOKING AT THE
COST AND ALLOCATIVE EFFICIENCYOF
USING RESOURCES.
LEVEL OF ANALYSIS
Business
Functional
Areas
Microecon.
concepts
Macroecon. concepts
MAIN CONCEPTS AND ANALYSIS IN
ECONOMICS
MARGINAL ANALYSIS

OPTIMIZATION

EQUILIBRIUM

VALUE (Values of exchange) and
OPPORTUNITY COST

TOOLS USED IN ECONOMICS
ANALYIS
MATHEMATICAL FUNCTIONS (numeric)
eg Q
d
= 200- 4.5P
x
+ 2.06A
x

GRAPHICAL ILLUSTRATION (Graphic)
y






X
y
1

x
1

MATHEMATICAL FUNCTIONS
Provides an expression of a relationship
between dependent variable (y) and
independent variables (x
1
; x
2
; x
3
)
For example,
y = f (x
1
; x
2
; x
3
)
Q
d
= f ( Price ; Advertising expenditure;
Income)
Q
d
= 220 2.25P + 0.45Adv+ 0.06Inc
APPLICATION OF MARGINAL ANALYSIS

Marginal values, for example, marginal revenue,
marginal cost, marginal productivity of labor, marginal
propensity to consume etc are very much applied in
economic analysis for decision making.
Marginal cost and marginal revenue are expressed as
follows:
MC = TC/Q
MR = TR/Q
Thus,
Output at max. profit is when MR=MC, i.e.
TC/ Q = TR/Q
Output at max. revenue is when MR= 0, i.e.
TR/Q = 0


APPLICATION OF MARGINAL ANALYSIS

Note:
Managers need to remember, maximizing
revenue does not necessarily means getting
maximum profit.

It is only true, if MR is constant (price is fixed
at all levels of output) and when MC is also
constant(there is no diminishing productivity in
the use of inputs).


DERIVATIVES AND DIFFERENTIATION
FOR MARGINAL ANALYSIS

Example,
The process of finding the
derivatives y/x from a function:
- linear function
- quadratic function
- cubic function

DERIVATIVES AND DIFFERENTIATION
FOR MARGINAL ANALYSIS
Derivatives are used to find the
effect of a very small change of
independent variable (x) on the
dependent variable (y),
expressed as y/x
The process of finding the
derivatives is known as
differentiation.