Name: Ashar Abbas.

Father Name: Safdar Abbas.

Semester: 5th
Subject: Managerial Economics.
Submitted to: Sir Faisal Saleem Mushabbar.
Seat No: B192014

Question: 1

Analyze the importance of the ‘Five Forces Framework’ for the effective ‘Economics
Management’.

Answer: 1

The notion that there are five forces that determine the competitiveness and attractiveness of a

market. Porter's five strengths help identify strengths in a business situation. It is useful to

understand both the current competitive position of the organization and the strength of the

position in which an organization may look for transition.

An analysis of the five forces can help organizations understand the factors that affect profits

in a particular industry, and can help them make informed decisions: whether to enter a

particular industry or not. Whether to increase capacity in a particular industry or not. And

develop competitive strategies

The five forces are as follows:

1. Supplier power

Evaluate how easy it is for suppliers to raise prices. It is driven by: the number of suppliers of

each required input. The uniqueness of their products or services. Relevant size and power of

supplier and switching cost from one supplier to another.

2. Buyer power

Estimate how easy it is for buyers to cut prices. Runs from: Number of buyers in the market.

The importance of each individual buyer in the organization; And the cost of switching from

one supplier to another to the buyer. If a business has only a few powerful buyers, they are

often able to order terms.

3. Competitive rivalry

The main driver is the number and potential of competitors in the market. Many competitors

offer non-controversial products and services, which will reduce the market's attention.

4. Threat of substitution

Where there are alternative products on the market nearby, consumers are more likely to

switch to alternatives in response to rising prices. This reduces both the power of suppliers

and the focus of the market.

5. Threat of New Entry

Profitable markets attract newcomers, which reduces profits. Unless there are strong and

lasting barriers to the entry of officials, for example, patents, economies of scale, capital

requirements or government policies, profits will fall to a competitive rate.

Question: 2

Elaborate the significance of ‘Demand, Elasticity, Revenue, Surplus and Shortage’ in context

to ‘Quantity Demand Analysis’

Answer: 2

1. Demand:

Quantity demand is a term used in economics to describe the total amount of a good or

service that consumers demand for a specific period of time. It depends on the price of a good

or service in a market, regardless of whether the market is balanced or not.

The relationship between demand quantity and price is known as demand curve, or simply

demand. The degree to which quantity demands change in terms of price refers to the

elasticity of demand.

2. Elasticity:

If the price of a product goes up, people move on to another product.

3. Revenue:

It depends on the cost if the cost will reduce the demand for the product and there will be

more revenue.

4. Surplus.
Demand flexibility shows the relationship between the price demanded and the quantity

demanded and provides an accurate calculation of the effect of the change in price on the

quantity demanded.

Quantity requested and quantity provided at this price. The quantity that producers want to

sell is more than the quantity that consumers want to buy. This is known as surplus.

5. Shortage:

Suppose that the price is $1.20 per gallon, At this price, the quantity demanded is 700

gallons, and the quantity supplied is 550 gallons. This is known as shortage.

Question: 3

Enumerate as to how ‘Production process and costs’ applied by a manufacturing firms can be

crucial in high profitability decision making

Answer: 3

Production fiction is a function that defines the maximum output output with a given set.

Land, labor, capital and firm are the factors of production.

Production is a process where the manager has to decide which product to launch and what

the price should be.

Decisions:

The decisions that make firms increase profits are as follows:

1. Complete business objectives.

2. Lack of manufacturing cost.

3. Receiving raw materials for their products permanently.

4. Gain competitive advantage through some uniqueness in the product.

5. Increase the name of the firm's value.

Many other decisions also play an important role in important decision making.

Question: 4

Explain the effectiveness of the factors for optimal managerial decisions, including the

number of firms competing in a market, the relative size of firms, technological and cost

considerations, demand conditions, and the ease with which firms can enter or exit the

industry.

Answer: 4

Managerial Decision Making process:

The five steps involved in the administrative decision-making process are outlined below:

1. Establishing the Objective:

The first step in the decision-making process is to establish the purpose of the business

enterprise. The main goal of a private business is to maximize profits. However, a business

firm may have other goals, such as maximizing the firm's sales or growth.

2. Defining the Problem

The second step in the decision-making process is to clarify or identify a problem. Explaining

the nature of the problem is important because decision making is about solving the problem.

For example, a cotton textile firm may find that its profits are declining.
Once the source or cause of the fall in profits has been identified, the problem has been

identified and explained.

3. Identifying Possible Alternative Solutions

Once the problem has been identified, the next step is to find an alternative solution to the

problem. This will require consideration of the variables that affect the problem. Thus, the

relationship between the variables and the problems will have to be established.

In this regard, various assumptions can be made which will become alternative courses for

problem solving.

Here are two possible solutions to the problem:

1. Only updating and replacing old machinery.

2. Build a completely new plant equipped with the latest machinery.

The choice between these alternative courses depends on the increase in profits.

4.Evaluation of alternative courses of action

The next step in making business decisions is to review the alternative curriculum. This

requires collecting and analyzing relevant data. Some data will be available in the various

departments of the firm itself, others can be obtained from industry and government.

5.Implementation of the decision:

After examining the alternative courses of action and choosing the optimal course of action,

enforcing the decision is the last step. The implementation of the decision requires constant

monitoring so that the best course of action yields the expected results. Thus, if it is found that

the expected results are not forthcoming due to improper implementation of the decision, then

corrective measures should be taken.