Managerial Economics Module 1 IDGN

LEARNING
PAMANTASAN NG LUNGSOD NG MUNTINLUPA

MODULE COLLEGE OF BUSINESS ADMINISTRATION
University Road, Poblacion, Muntinlupa City
QR/CBA/0
Course Title: Economic Development
Issue No. 0 Revision No. 0 Effectivity Date 7 September 2020 Page No. 1
Introduction
This module emphasizes the need for open communication and clarity between the students and
the subject instructor so both can lay out their expectations, clarify areas that needs to be addressed
right from the start. As a conducive environment is brought about, the module also introduces the
students to the nature and importance of the subject, as well as orient them on the elementary topics
of the subject.
Learning Targets
After studying this module, you are expected to:
a. To know and understand Economics and Managerial Economics.

b. To determine the important role of Managerial Economics.
c. To identify the nature of Managerial Economics.
d. To understand the theory of the firm.
Activity
1. Discussion of course guide and course syllabus.

2. Getting to know each other. Brief introduction of the professor and students, expectations
with the course and to the professor.
3. Presentation of Module Week 1.
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Discussion
1.1 Introduction to Economics_________________________________________________
A. What is Economics?
Economics is a branch of social science that deals with the efficient allocation of scarce resources to meet the
never-ending human economic wants.
B. Division of Economics
1. Macroeconomics
Macroeconomics examines either the economy as a whole or its basic subdivisions or aggregates, such as the
government, household, and business sectors. An aggregate is a collection of specific economic units treated as
if they were one unit.
2. Microeconomics
Microeconomics is concerned with individual units such as a person, a household, a firm, or an industry. At this
level of analysis, the economist observes the details of an economic unit, or very small segment of the economy,
under a figurative microscope. In microeconomics we look at decision making by individual customers, workers,
households, and business firms.

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C. Methodology of Economics
1. Normative and Positive Approach
Normative economics focuses on the value of economic fairness, or what the economy "should be" or "ought
to be. Example: Privatization leads more efficient allocation of scarce resources
Positive economics describes and explains various economic phenomena or the "what is" scenario.
Example: Philippine Inflation rate in 2020 was 2.6%.
2. Ceteris Paribus Assumption
Ceteris paribus, literally "holding other things constant," is a Latin phrase that is commonly translated into
English as "all else being equal." A dominant assumption in mainstream economic thinking, it acts as a
shorthand indication of the effect of one economic variable on another, provided all other variables remain the
same.
3. Philosophical Approach: Inductive and Deductive Logic
Inductive reasoning refers to reasoning that takes specific information and makes a broader generalization that
is considered probable while remaining open to the fact that the conclusion may not be 100% guaranteed.
Deductive reasoning refers to starts out with a general statement, or hypothesis, and examines the possibilities
to reach a specific, logical conclusion.
4. Macro vs Micro
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D. Understanding the Economy: 5-Sector Circular Flow Model
1. Households consist of one or more persons who live in the same housing unit, such as a family. Households
own all the economic resources in the economy. The economic resources are land, labor, capital, and
entrepreneurial ability.
2. Firms/Businesses is a privately owned organization that produces goods and services and then sells them.
Businesses sell these goods and services to households in the market for goods and services.
3. Financial Intermediaries companies/units who collects and channels excess funds from those funds that has
an excess of it to those who are in need of its income is not always goes to consumption.
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4. Government - establishing and enforcing the rules of the game.
• Public goods - social welfare benefits ; goods/services that are non-exclusive and non-rivalry.
• Private goods - ability to pay, sufficient income to buy the product – exclusivity.
• Merit goods - combination of public (needed by society) and private goods (profit).
5. Other Countries - recognized by the United Nations as not being self-governing.
• Import is a good or service bought in one country that was produced in another.
• Exports are goods and services that are produced in one country and sold to buyers in another.
• Trade surplus = Export > Import
• Trade deficit = Import < Export
• Balance of trade = Export = Import in terms of monetary value
E. 7 Goals of Economics
1. Economic Growth
Produce more and better goods and services or, more simply, develop a higher standard of living.
2. Full Employment
Provide suitable jobs for all citizens who are willing and able to work.
3. Price Stability
Avoid large upswings and downswings in the general price level. Avoid inflation and deflation.
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4. Equitable distribution of Income
Ensure that no group of citizens faces poverty while most others enjoy abundance.
5. Balance of Trade
Reasonable overall balances with the rest of the world in international trade and financial transactions.
6. Economic Security & Freedom
Guarantee that businesses, workers, and consumers have a high degree of freedom in their economic activities.
Feeling of freedom and safety.
7. Economic Efficiency
Achieve the maximum fulfillment of wants using the available productive resources.
F. 4 Problem of Economics
1. Production
the process of combining different inputs to generate/create the desired commodities. It is guided by the 4
production questions such as:
• For whom to produce?

• What to produce?
• How to produce?
• How much to produce?
2. Distribution
the channeling of the produced commodities to the intended beneficiaries.

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3. Consumption
the process of utilizing the produced commodities to the intended beneficiaries.
4. Growth-over-time
pertains to the increase in the productive capacity of the economy over time.
G. Opportunity Cost
The amount of other products that must be forgone or sacrificed to produce a unit of a product.
H. Model and Theory
Theory is a logical view of how things work and is frequently formulated based on observation.
Model is a formalization of theory that facilitates scientific inquiry.
I. Economic System
Market System/Capitalism each participant acts on his or her own interest, each individual or business seeks
to maximize its satisfaction or profit through its own decisions.
Command System/Socialism government owns most property resources and economic decision concerning
making occurs through a central economic plan.

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1.2 Managerial Economics_________________________________________________
A. What is Managerial Economics
Managerial Economics refers to the application of economic theory and tools of analysis of decision
science to examine how an organization can achieve its aims or objectives most efficiently.
Managerial Economics is basically, Advance Microeconomics + Macroeconomics
Managerial Economics is also known as Business Economics.
B. What is Managerial Economics

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C. Theory of the Firm
• Combines and organizes resources for the purpose of producing goods and/or services for sale.
• Internalizes transactions, reducing transactions costs.
• Primary goal is to maximize the wealth or value of the firm.
• Satisfy needs and wants of the firm and the society.
• Act as agents of innovation and modernization of the economy.
• Provide employment.
• Utilize stagnant or underutilized resources.
• Promote efficiency.
• Utilize the planet’s available resources responsibly and give back to ensure sustainability.
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• Supplier – provides a product or service to another entity.

• Management – minimize the cost and maximize the profit. Planning organizing directing staffing and
controlling.
• Customers - are the foundation of any business' success.
• Employees - are the true assets of an organization. They are the ones who contribute effectively towards the
successful functioning of an organization.
• Investors – provide funds and bring connections.
• Society – business create job opportunities to people. They need people to produce and sell their goods and
services to customers.
Resources/References
Webster, Thomas. Managerial Economics Theory and Practice.
Salvatore, Dominick. Managerial Economics in a Global Economy. 12th Int’l. Ed. John Wiley and Sons, Inc. 2016

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LEARNING

PAMANTASAN NG LUNGSOD NG MUNTINLUPA

After studying this module, you are expected to:

a. To know and understand Economics and Managerial Economics.

1. Discussion of course guide and course syllabus.

1.1 Introduction to Economics_________________________________________________

never-ending human economic wants.

if they were one unit.

households, and business firms.

1. Normative and Positive Approach

to be. Example: Privatization leads more efficient allocation of scarce resources

Example: Philippine Inflation rate in 2020 was 2.6%.

2. Ceteris Paribus Assumption

3. Philosophical Approach: Inductive and Deductive Logic

to reach a specific, logical conclusion.

D. Understanding the Economy: 5-Sector Circular Flow Model

4. Government - establishing and enforcing the rules of the game.

5. Other Countries - recognized by the United Nations as not being self-governing.

• Trade surplus = Export > Import

• Trade deficit = Import < Export

• Balance of trade = Export = Import in terms of monetary value

4. Equitable distribution of Income

6. Economic Security & Freedom

Feeling of freedom and safety.

production questions such as:

• For whom to produce?

the channeling of the produced commodities to the intended beneficiaries.

the process of utilizing the produced commodities to the intended beneficiaries.

H. Model and Theory

Model is a formalization of theory that facilitates scientific inquiry.

to maximize its satisfaction or profit through its own decisions.

making occurs through a central economic plan.

1.2 Managerial Economics_________________________________________________

A. What is Managerial Economics

Managerial Economics is basically, Advance Microeconomics + Macroeconomics

Managerial Economics is also known as Business Economics.

B. What is Managerial Economics

C. Theory of the Firm

• Internalizes transactions, reducing transactions costs.

• Primary goal is to maximize the wealth or value of the firm.

• Satisfy needs and wants of the firm and the society.

• Act as agents of innovation and modernization of the economy.

• Utilize stagnant or underutilized resources.

• Supplier – provides a product or service to another entity.

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