1、1.1 2005 Prentice Hall,Inc.Economics for Managersby Paul FarnhamChapter 1:Managers and Economics1.2 2005 Prentice Hall,Inc.Two Perspectives of EconomicsMicroeconomicsAnalyzes the decisions that individual consumers,firms,and industries make as they operate in a market economyMacroeconomicsFocuses on
2、 the overall level of economic activity,changes in price level,and amount of unemployment 1.3 2005 Prentice Hall,Inc.Important DefinitionsManagerial economicsWhen microeconomics is applied to business decision makingPriceAmount of money charged for different goods and services in a market economy1.4
3、 2005 Prentice Hall,Inc.Important DefinitionsOutputProducts sold by a firmInputResources such as land,labor,capital,raw materials,and entrepreneurship1.5 2005 Prentice Hall,Inc.Microeconomic Influences on ManagersRelative pricesThe price of one good in relation to the price of another similar goodMa
4、rketsThe institutions and mechanisms used for the buying and selling of goods and services1.6 2005 Prentice Hall,Inc.Major Types of MarketsPerfect competitionMonopolistic competitionOligopolyMonopolyMany firmsOne firm1.7 2005 Prentice Hall,Inc.Characteristics of Markets1.Number of firms competing wi
5、th one another2.Whether products sold are differentiated or undifferentiated3.Whether entry into the market is easy or difficult4.Amount of information available to market participants1.8 2005 Prentice Hall,Inc.Perfect CompetitionCharacteristicsA large number of firms in the marketUndifferentiated p
6、roductEase of entry into the marketComplete information available to all market participants1.9 2005 Prentice Hall,Inc.Perfect Competition:Assumption 1Behavior of an individual firm is distinguished from the outcomes for the entire market or industryPrice-takerA firm cannot influence the price of it
7、s product and therefore can sell any amount of output at that price1.10 2005 Prentice Hall,Inc.Perfect Competition:Assumption 2No product differentiationConsumers do not care about the identity of a specific supplierPurchase is based largely on price of the product1.11 2005 Prentice Hall,Inc.Perfect
8、 Competition:Assumption 3Entry into the market is costlessIf a perfectly competitive firm is making a profit,other firms will enter the industry to attempt to earn profits also1.12 2005 Prentice Hall,Inc.Perfect Competition:Assumption 4Complete information is available to all market participantsPerf
9、ectly competitive firms have no market power to influence the prices of its products and develop competitive strategies1.13 2005 Prentice Hall,Inc.MonopolySingle firm produces a product for which there are no close substitutesBarriers to entry exist to keep competitors from entering the market1.14 2
10、005 Prentice Hall,Inc.Monopolistic CompetitionFirms produce differentiated productsSeveral firms are in an industryEach firm has only limited ability to earn above-average profits1.15 2005 Prentice Hall,Inc.OligopolyCompetition among a small number of large firms that have market power but must cons
11、ider competitors actionsMutual interdependence is a key characteristicOligopoly firms have market power but may be limited in how they use that power1.16 2005 Prentice Hall,Inc.Goal of Profit MaximizationFirms develop strategies to earn highest profit possibleProfit acts as a signal in a market econ
12、omyIncreased competition leads to lower prices and revenues,eliminating excess profits1.17 2005 Prentice Hall,Inc.Managerial Rule of Thumb:Microeconomic Influenceson ManagersHow consumer behavior affects revenuesHow production technology and input prices affect costsHow the market environment influe
13、nces their ability to set prices and respond to competitors1.18 2005 Prentice Hall,Inc.Macroeconomic Influences on ManagersThe circular flow model shows the level of economic activity in a country as a flow of expenditure from households to businesses The flow then returns to consumers in the form o
14、f factors of production1.19 2005 Prentice Hall,Inc.How Economists Use the Circular Flow ModelPersonal consumption expenditures(C)Gross private domestic investment spending(I)Government consumption expenditures and gross investment(G)Net export spending(F)or total export spending(X)minus total import
15、 spending(M)1.20 2005 Prentice Hall,Inc.Gross DomesticProduct(GDP)Measure of overall economic activity used to judge how an economy is performingMeasures the market value of currently produced final goods and services within a given time 1.21 2005 Prentice Hall,Inc.Factors Affecting Macro Spending B
16、ehaviorChanges in consumption and investment behavior of private individualsNew directions of a countrys monetary or fiscal policiesDevelopments occurring internationally that affect domestic economy1.22 2005 Prentice Hall,Inc.PoliciesMonetary policiesPolicies adopted by a countrys central bank that
17、 influence interest rates and the amount of funds available for loansFiscal policiesChanges in taxes and spending by national governments that can stimulate or restrain the economy1.23 2005 Prentice Hall,Inc.Managerial Rule of Thumb:Macroeconomic Influenceson ManagersChanges in the macro environment
18、 affect individual firms and industries through the microeconomic factors of demand,production,cost,and profitability1.24 2005 Prentice Hall,Inc.Summary of Key TermsMicroeconomicsMacroeconomicsPerfect competitionMonopolistic competitionOligopolyMonopolyCircular flow model1.25 2005 Prentice Hall,Inc.Summary of Key TermsConsumptionInvestmentGovernment spendingSpending on exports and importsMonetary policyFiscal policy1.26 2005 Prentice Hall,Inc.Do you have any questions?
