KOLEHIYO NG SUBIC

SUBIC, ZAMBALES

Course Description : Managerial Economics

Date & Schedule : 12:00PM-1:30PM
Professor : Filipina E. Geronimo

List of Attendee:

1. Anivado, Jonel
2. Bacani, Rachile
3. Bautista, Camila
4. Bautista, Emmanuel
5. Conde, Jonnah
6. Cunanan, Diane Rose
7. Eladistu, Clarence Joy
8. Espice, John Michael
9. Facon, Ashleyne Kim
10. Fajota, Jasmin Veronica
11. Famisan, Clarisee Yen
12. Garcia, Julie Ann
13. Garduque, Juvie Lyn
14. Garrino, Ma.Shaina
15. Hierco, Jasmin Rhielle
16. Ignacio, Rosalie
17. Landicho, Mariela
18. Logronio, Ranel
19. Macawile,Josslyn
20. Mendoza, Michelle
21. Mercader, Maria
22. Misoles, Erica
23. Navarro, Mhaeniel
24. Podiotan, Wynpha
25. Quirimit, Ellson
26. Ramos, Noralyn
27. Riddle, Michelle
28. Roque, Raphael
29. Santos, Luisito
30. Tulio, Jeremy
31. Yape, Rosemarie

At September 22, 2020, 12:30pm - Online class started via Google Meet led by the reporter. Today’s
topic was Introduction to Managerial Economics presented by Raphael Roque. Here are the reported
topics in the class:

ECONOMICS
• Deals with how to satisfy the unlimited wants and needs of humans with limited or scarce
resources we have
• Deals with scarcity and the wants and needs
• It comes from the Greek word “oikonomiya” meaning household management.
• Originated in Greece, first coined by Aristotle
• It has two branches:
MICROECONOMICS – deals with the smallest details in the economy
MACROECONOMICS- deals with large details in the economy

MANAGERIAL ECONOMICS
• Helps managers recognize how economic forces affect organizations and describes the economic
consequences and behavior
• It also links economic concepts, data and quantitative methods to develop vital tools for
managerial decision making
• Is a discipline that combines economic theory with managerial practice
• It tries to bridge the gap between the problem of logic that intrigue economic theorist and the
problems of policy that plague practical managers
 KOLEHIYO NG SUBIC
SUBIC, ZAMBALES

• Managerial economics helps managers arrive at a set of operating rules that aid in the efficient
use of scarce human and capital and resources

• It is a relevant to the management of government agencies, schools, hospitals museums and

similar not-for-profit institutions as it is to the management of profit0oriented businesses.

NATURE OF MANAGERIAL ECONOMICS

 MANAGEMENT
• Guidance, leadership and control of the efforts of a group of people towards some
common objective
• Creation and maintenance of an internal environment in an enterprise where individuals,
working together in groups, can perform efficiently and effectively towards the
attainment of group goals ( Koontz and O’Donell)
• Coordination
• An activity or an ongoing process
A purposive process
• An art of getting things done for other people
 ECONOMICS
• Economics are primarily engaged in analyzing and providing answers to manifestations
of the most fundamental problem, scarcity. Scarcity of resources results from two
fundamental facts of life:
A. Human wants are virtually unlimited and insatiable
B. Economic resources to satisfy these human demands are limited

THREE CHOICE PROBLEMS OF AN ECONOMY

 WHAT TO PRODUCE?
Demand theory guides the manager in the selection of goods and services for production. It analyses
consumer behavior with regard to:
a. Type of goods and services they are likely to purchase in the current period and in the future
b. Factors influencing the consumption of a particular good or service
c. The effect of a change in these factors on the demand of that particular good or service
 HOW TO PRODUCE?
• It involves selection of inputs and techniques of production. Decisions are made with
regard to the purchase of items ranging from raw materials to capital equipment.

 FOR WHOM IT SHOULD BE PRODUCED?

• An analysis of market structure explains how price and output decisions are taken under
different market forms.

SCOPE OF MANAGERIAL ECONOMICS

 Four group of problem in both decision making and forward planning
1. Resource Allocation- scarce resources have to be used with utmost efficiency to get optimal results .
These include production programming, problem of transportation etc.

2. Inventory and queuing problem-

• Inventory problems involve decisions about holding of optimal levels of stock of raw materials
and finished goods over a period.
• Queuing problems involve decisions about installation of additional machines or hiring of extra
labour in order to balance the business lost by not undertaking these activities

3. Pricing Problems
Fixing prices for the products of the firm is an important part of the decision making process.
Pricing problems involve decisions regarding various methods of pricing to be adopted

4. Investment Problems
Forward planning involves investment problems. These are problems of allocating scarce
resources over time. For example, investing in new plants, how much to invest, sources of funds etc.
 KOLEHIYO NG SUBIC
SUBIC, ZAMBALES

THEORY OF THE FIRM

• A business model where people are directly involve which includes customers, stockholders,
management, employees and suppliers. Society is also involved because businesses use scarce
resources, pay taxes, provide employment opportunities, and produce much of society’s material
and services output.
• Profit maximization is the traditional trend
• Today, the emphasis on profits has been broadened to encompass uncertainty and the time value
of money. In this more complete model, the primary goal of the firm is long-term expected
value maximization.
• The value of the firm is the present value of the firm’s expected future net cash flows

CONSTRAINTS AND THEORY OF THE FIRM

• Organizations frequently face limited availability of essential inputs, such as skilled labor, raw
materials, energy, specialized machinery and warehouse space
• Decisions can also be constrained by contractual requirements. For example, labor contracts limit
flexibility in worker scheduling and job assignments
• Legal restrictions, which affect both production and marketing activities, can also play an
important role in managerial decisions.

Limitations of the Theory of the Firm

• Research shows that vigorous competition typically forces managers to seek value maximization
in their operating decisions
• Competition in the capital markets forces managers to seek value maximization in their financing
decisions as well
• Managers who pursue their own interests instead of stockholders’ interest s run the risk of losing
their job
• Unfriendly takeovers are especially hostile to inefficient management that is replaced. Moreover,
recent studies show a strong correlation between firm profits and managerial compensation.
• It is unwise to seek the best technical solution to a problem if the costs of finding such a solution
greatly exceed resulting benefits.
• As a result, what often appears to be satisfying on the part of management can be interpreted as
value-maximizing behavior once the costs of information gathering and analysis are considered
• Similarly, short-run growth maximization strategies are often consistenty with long-run value
maximization when the production, distribution and promotional advantages of large firm size are
better understood
• Finally, the value maximization model also offers insight into a firm’s voluntary ‘social
responsible’ behavior. The criticism that the traditional theory of the firm emphasizes profits and
value maximization while ignoring the issue of social responsibility is important.

PROFIT MEASUREMENT
 PROFIT
• Usually defined as the residual of sales revenue minus the explicit costs of doing business
• The economist also defines profit as the excess of revenues over costs. However, inputs
provided by owners, including entrepreneurial effort and capital, are resources that must
be compensated
• Similarly, the opportunity cost of owner effort is determined by the value that could be
received in alternative employment.
• ECONOMIC PROFIT- business profit minus the implicit (noncash) costs of capital and
other owner-provided inputs used by the firm.

WHY DO PROFITS VARY AMONG FIRMS

 Disequilibrium Profit Theories
1. Frictional Profit Theory- it states that markets are sometimes in disequilibrium because of
unanticipated changes in demand or cost conditions
2. Monopoly Profit Theory- same firms earn above-normal profits because they are
sheltered from competition by high barriers to entry. Monopoly profits can also arise
because of luck (being in the right industry at the right time) or from anticompetitive
behavior.
 KOLEHIYO NG SUBIC
SUBIC, ZAMBALES

 Compensatory Profit Theories

1. Innovation Profit Theory- describes above-normal profits that arise following successful
invention or modernization

2. Compensatory Profit Theory- describes above-normal rates of return that reward firms for
extraordinary success in meeting customer needs and maintaining efficient operations.
Compensatory profit theory also recognizes economic profit as an important reward to the
entrepreneurial function of owners and managers.

ROLE OF PROFITS IN THE ECONOMY

• Above-normal profits serve as a valuable signal that firm or industry output should be increased
• Expansion by established firms or entry by new competitors occurs quickly during high profit
period.
• Below-normal profits signal the need for contraction and exit. Above-normal profits also reward
innovation and efficiency, just as below-normal profits penalize stagnation and inefficiency.

ROLE OF BUSINESS IN SOCIETY

• Firms exist because they are useful. They survive by public consent to serve social needs.

Central Problems in Society

FOUR DISTINCTIVELY MACROECONOMICS PROBLEM

1. Recession-defined as a period of two or more successive quarters of decreasing production
• In many recession periods, businesses that announced they were hiring had long lines of
people who wanted to apply, with many more people than they could hire
• Another possibility is that production might drop because a war or disaster had destroyed
factories and other capital goods
Ex: The Great Depression happened in the 1930’s

2. Inflation-Inflation is a rise in the general level of prices of goods and services in an economy over
a period of time

3. Unemployment-Occurs when a person is available to work and currently seeking work, but the
person is without work
A status in which individuals are without job and are seeking a job.
a. Reduction in the output
b. Reduction in Tax revenue
c. Rise in Government expenditure

4. Economic growth or stagnation

Period of many years of slow growth of gross domestic product, in which the growth is, on the
average, slower than the potential growth in the economy
Causes of stagnation:
a. Population growth might be high
b. Fewer people might choose to work.
c. The growth of labor productivity might slow.
Economic growth that, while positive, is less than the potential growth of the economy.

The topics were not presented completely due to weak internet connection. The alternative way to report
it completely were to film it and explain it. At 1:30 pm the class was adjourned.