Question 1> What are the major areas of microeconomics that business managers must be familiar with in performing their managerial functions effectively and efficiently?
Answer: Operational problems are of internal nature. They include all those problems which arise with in the business organization and fall within the purview and control of the management. Same of the basic internal issues are : Choices of business and the nature of the product. Choice of the size of the firm. Choice of technology : choosing the factor combination Choice of process. How to promote sales. How to face price competition How to decide on new investments How to manage profit and capital How to manage inventory
The micro economics have great impact on the following managerial decisions: Theory of Demand : Demand theory explains the consumer’s behavior .It answers the questions: How do the consumers decide whether or not to buy a commodity? How do they decide on the quantity of commodity to be purchased? When do they stop using one commodity or may switch to another. How does the consumer behave when there is price change for a particular commodity? The knowledge of demand theory therefore be important for managers Theory of production and production decisions : Production theory which is also known as theory of firms explains the relationship between inputs and outputs. It also explains under what conditions cost increase or decrease, how total output increases when units of one factors have increased keeping other factors constant. Production theory is therefore very important for managerial decisions. Analysis of market structure and pricing theory : Price theory explains how prices are determined under different market conditions. When price discrimination is desirable, feasible and profitable, to what extent advertising being helpful in expanding sales in competitive market. Thus price theory can be helpful in determining the price policy of the firm....
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