Managerial Economics

Dr. Ashraf Helmy

Salma Elsayed
 Lecture 1
Introduction To Economics
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Economics design for People
Made To Solve problem
Every one had a needs , to cover your needs , you must have a resources
GAP Mean The Problem of SCARCITY ( rare )
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Needs

10,000 EGP 5000 EGP

He needs 15,000 EGP

Thiers a GAP between needs and resources

GAP Mean The Problem of SCARCITY

Relative GAP = 5000 EGP

He has 10,000 EGP Resources

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CHOICE decision
Has to be made
Allocation
1
√ 10,000 EGP of resources 5000 EGP √

If he chose the Mobile Phone If he chose the sunglasses

The Cost of this choice
The Cost of this choice
1. Visible Cost ( Money Cost ) 5000 EGP
1. Visible Cost ( Money Cost ) 10,000 EGP
2. Invisible Cost ( Opportunity cost )
2. Invisible Cost ( Opportunity cost )
the forgone alternative
the forgone alternative

The Sunglasses The Mobile Phone

He not able to purchase the two product together

Resources < Needs = Scarcity

Priorities
MAX

1. The Most important need .

2. Less important need .
3. The least important need . Opportunity Cost

MAX

There are two types of Country 1. How To allocate of scarce resources ?

1. Developing 2. The Best use of the scare resources
2. Developed 3. Improve the resource
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B A

CHOICE decision
Has to be made

10,000 EGP 9,500 EGP √

An inefficient Choice An Efficient Choice

2 The Best use of the scare resources

Absence of waste and corruption

in using the scarce recourses
 Scarcity = Economic Problem Economics flier

Poor People
Rich People

GAP GAP

Resources Needs Needs

Improvement 3
Present Future
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 The main reason for the emergence of economics is the permanent gap exists between resources and needs in favor of the later .
 This Problem in economics is known as “ scarcity “ , which means that resources are relatively scarce
 ( Rare compared to the needs ) so that people and countries will not be able to obtain all what they need .

 Because resources are scare , two critical choice decision should be efficiently made in the short run :-
 1st people and countries have to efficiently determine their priorities of needs and set them in the right order .
 2nd People and countries have to use their scarce resources in the absence of all sources of waste and corruption .

 Any choice decision has hidden cost which is the opportunity cost of the decision , even if does not has a money cost .
 Opportunity cost is the cost of the second forgone alternative .

 In the process of resources allocation , the opportunity cost of choice decision has to be minimized by sacrificing the
relatively least important need .

 In the long run , people and countries have to prevent the gab that exists between resources and needs from being widening
By enhancing the quality of available resources and working on augmenting the amount of these resources .

 For instance , education , training and health programs are necessary to improve the quality of labor force and promote the Productivity of
labor factor , which enables for more production and returns for the labor factor .
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 The ultimate goals of economics and any economic policy and decision is to achieve human welfare or people happiness .
 In this context , the economic system which manages to increase the level of welfare of the citizens by efficiently allocating
And using the available resources , and by working on maintain and minimalizing the gab between resources and needs is
considered a successful one .

Economics is all about Resources

Efficiency

Resources management
 Allocating  Improvement of Resources
 Using

welfare or people happiness

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Countries are poor because :
They lack the willingness and or the ability to manage the available resources .
They lack the willingness and or the ability to improve resources over time .
They relatively lack resources
 Microeconomics V.S Macroeconomics E

Economy

Agricultural Sector Industrial Sector Services Sector

Mining Manufacturing
 Microeconomics V.S Macroeconomics E
Microeconomics Microeconomics

Studies individual units in the economy such as Studies The performance of economy as a whole
certain markets , Producers , Consumers , Sector … etc.

Studding the tomato market buyers and sellers Studding the performance of Egyptian economy
in the tomato market Unemployment rates , inflation rates ,
public budget deficit
 Three Productive Sector ( agent )

Privet Sector Public Sector

Government
House holds Businesses
“ Families

Consumption Investment
 Economic system
Economic system are divided into three main categories

Economic system

Free Market Economy Command Economy Mixed Economy

1929
Failed

It is controlled by the privet sector The Government owns and

(Business and House holders )
with no government interference
Out of recourses Allocation , Use , Improvement
The Government participates
controlled every thing in the
with the privet sector in
economy
managing the resources
 Resources and production process
Factors of production

Land Labor Capital Entrepreneur

Rent Salary , wages Interests Profit

 Resources and production process
Production Process

1 Inputs Processing Outputs 3

2
Designing a framework in which
different factors of production interact
with one another to generate value added

Goods Services
 Y Production Possibilities Frontier
Resources with different degrees of specialization

18
A
15 Alternative Production Possibilities
B
Possibilities X Y ∆Y
C
12 A 0 15 -
Unattainable B 1 14 1
D
9 C 2 12 2
E D 3 9 3
6
E 4 5 4
Inefficient
F 5 0 5
3
F
X
0 1 2 3 4 5 6 7
 Y Production Possibilities Frontier
Improvement in resources and the level of technology
18
A
15 Alternative Production Possibilities
B
Unattainable Possibilities X Y ∆Y
C
12 A 0 15 -

D I B 1 14 1
9 C 2 12 2
E D 3 9 3
6
E 4 5 4
Inefficient
F 5 0 5
3
F
X
0 1 2 3 4 5 6 7
Pastry Production Possibilities Frontier
Non specialization Resources
6
A
5 Alternative Production Possibilities
B Possibilities X Y ∆Y
4 A 0 5 -
C B 1 4 1
3 C 2 3 1
D D 3 2 1
2
E 4 1 1
E F 5 0 1
1
F
Bread
0 1 2 3 4 5 6 7
THANK YOU
Salma Elsayed