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Innovation in The Ghanaian Financial Market
Innovation in The Ghanaian Financial Market
Introduction to managerial
economics
Norwegian Cruises Managing Director Replaced
Following Acquisition of Rival Firm
• Norwegian Cruises is a company that owns and
manages a large fleet of ships used primarily for
cruises along the Norwegian fjords. Following a
spike in tourist arrivals in Norway, Kristofer, the
company’s managing director decided to increase
the company’s fleet by acquiring another rival
business. With the short-term interest rate at 8%,
Norwegian Cruises used $9million of its retained
earnings to acquire the assets and settle the
debts of Fjords Unlimited, a local struggling
• Business providing similar services. Kristofer’s
acquisition was based on predicted annual
sales of $2 million over the first five years.
After close review of the acquisition, the
board of directors qualified Kristofer’s
performance as poor and decided to
immediately terminate his employment and
appoint ANNGERD, Kristofer’s assistant
manager as the acting managing director. Do
you know why Kristofer was sacked?
Introduction
• Why study Managerial Economics
• The Manager
Anyone who channels resources to attain a
specific goal
• Economics
How individuals and societies make choices or
decisions subject to constraints or scarce
resources.
Economics
1-17
Economics of Effective Management
1-18
Economics of Effective Management
1-19
Economics of Effective Management
1-20
Economics of Effective Management
1-21
Marginal Analysis
• Given a control variable, Q, of a managerial
objective, denote the
—Total benefit as B(Q)
—Total cost as C(Q)
• Manager’s objective is to maximise
• N(Q) =B(Q) –C(Q)
Using Marginal Analysis
• How can the manager maximise net benefits
• Use marginal analysis:
• Marginal Benefit: MB(Q)
– Change in total benefit arising from a change in the
managerial control variable, Q
• Marginal Cost: MC(Q)
—Change in total cost resulting from a change in the
managerial control variable, Q.
• Marginal Net Benefit: MNB (Q)
—MNB (Q)= MB (Q) – MC(Q)
Marginal Analysis Principle I
• Marginal principle
– To maximize net benefits, the manager should
increase the managerial control variable up to the
point where marginal benefits equal marginal
costs. This level of the managerial control variable
corresponds to the level at which marginal net
benefits are zero; nothing more can be gained by
further changes in that variable.
Marginal Analysis Principle II
• Marginal Principle (calculus alternative)
• Slope of a continuous function is the
derivative/marginal value of that function
• MB= dB(Q)/d(Q)
• MC= dC(Q)/d(Q)
• MNB = dN(Q)/d(Q)
Marginal Analysis using the Calculus
Alternative
• It is estimated that the benefit and cost structure of a firm
• B(Q) = 250Q -4Q2
• C(Q) = Q2