Mba 640 Managerial Economics
Exam is open book and open material.
1. Explain the interaction of Managerial Economics with other business disciplines, giving specific examples.
Managerial economics has been defined by conventional theorists as a science that "is all about how people make choices" After you’ve defined managerial economics and it’s relationship to its economic theory. Managerial economics will interact with each of these business’s disciplines at some point or another; demand, marketing, finance, accounting, management science and strategy.
An example of one of the disciplines (demand or price elasticity): Ford and Honda cater to the subcompact segment (marketing segmentation) of the automobile market with their Focus and Civic models, respectively. Are Ford Focus buyers more or less price sensitive than buyers of Honda Civics? One way to answer this question is to estimate the change in quantity demanded with a $100 increase in the price of each make. But this does not compare like with like.
A more consistent way of comparing the price sensitivity of Focus and Civic buyers is to use the own-price elasticity’s of the demands. The own-price elasticity’s of the demands for Focus and Civics have been estimated to be both 3.4. This indicates that Focus and Civic buyers are equally sensitive to price. For a 1% increase in price, both groups would reduce sales purchases by 3.4%.
2. Briefly describe the how the forces of supply and demand impact the allocation of resources in organizations.
Once the supply and demand has been experienced, a resource allocation strategy should be developed to which a manager can choose (capacity or demand based model) and where to expend these resources. Regardless of the specific strategy, the allocation of resources to meet specific demands results in fewer resources available to meet others supply and demands. Choose cautiously….
3. Compare and contrast