Project presentation

Managerial Economics
and The Organization
Introduction

Today, we will explore the fascinating

world of Managerial Economics and its
significant impact on organizational
decision-making. Managerial Economics
is all about applying economic principles
to solve the complex problems that
managers face.
 Contents

Role of Market
04/ Application
What is Cost Analyzes structure and
Managerial Conclusions example
Managerial economics in Competition
Economics Organization

Challenges
and
Risk and
Decision- Pricing Limitations
Key concepts Uncertainty
making Strategies
of Managerial
Framework
Economics
What is Managerial Economics?
Managerial Economics can be defined as the
application of economic theories and concepts
to make informed decisions within an
organization. It's like the economic toolkit that
managers use to analyze situations, understand
market dynamics, and optimize resource
allocation.
Key Concepts in Managerial Economics

To effectively use Managerial Economics, it's crucial to

grasp some key concepts. These include understanding
demand (what customers want), supply (what the
organization can provide), cost analysis (the expenses
involved), and marginal analysis (evaluating incremental
changes). These concepts are the foundation of
decision-making in this field.
Role of Managerial
Economics in Organizations
Managerial Economics plays a pivotal role in
organizations. It helps in optimizing resource
allocation by ensuring that limited resources
are used efficiently. It aids in making pricing
decisions, understanding consumer behavior,
evaluating investment opportunities, and
ultimately, enhancing an organization's
competitiveness.
Decision-Making Framework

The decision-making framework in Managerial

Economics involves several steps. This structured
approach ensures that choices align with
organizational goals.
1. Managers identify the problem or decision to
be made.
2. Gather relevant data, apply economic
concepts, analyze and evaluate their options.
3. Make informed decisions
Cost Analysis
Cost analysis is a critical aspect of Managerial
Economics. It involves understanding fixed and
variable costs, as well as opportunity costs.
Organizations use cost analysis to minimize
expenses, set prices, and assess the profitability
of different products or services.
Pricing Strategies

Pricing strategies are vital in Managerial

Economics. Organizations use various strategies
such as cost-plus pricing, price discrimination,
market-based pricing, and considering price
elasticity of demand to determine the best
pricing approach for their products or services.
Market Structure and Competition

Understanding market structure and competition is

essential. Different market structures like perfect
competition, monopoly, oligopoly, and monopolistic
competition require different strategies. Firms must
adapt their decision-making based on the competitive
environment they operate in.
Risk and Uncertainty

Managerial Economics helps organizations deal

with risk and uncertainty by using tools like
decision trees and expected value analysis. This
enables them to make informed choices,
manage risks, and maximize potential gains
while minimizing losses.
 Application Example
Let's look at a real-world example of how managerial
economics has made a difference.
Example: Netflix's Pricing Strategy
Price Discrimination: Netflix offers multiple subscription tiers to
attract a diverse customer base, effectively using price
discrimination.
Elasticity of Demand: By monitoring price elasticity, Netflix finds
the right balance between maximizing revenue and retaining
subscribers when adjusting prices.
Content Investment: Data-driven decisions guide content
investments to attract and retain subscribers.
Impact:

Profit Maximization: Netflix maximizes profits through

tiered pricing and content investments.
Subscriber Growth: Their data-driven approach
contributes to substantial subscriber growth.
Competitive Advantage: Netflix's adaptability based on
economics gives it a competitive edge.
Global Expansion: It enables tailored strategies for global
expansion.
Challenges and Limitations
Despite its benefits, managerial economics does have
challenges and limitations. For instance, it relies heavily
on accurate data and assumptions, and external
factors can be unpredictable. It's important to be
aware of these limitations when making decisions.
Conclusion

In conclusion, Managerial Economics is a

valuable tool for organizations. It equips
managers with the knowledge and techniques
needed to make well-informed decisions,
optimize operations, and achieve their goals. By
applying economic principles, organizations can
enhance their competitiveness and adapt to
changing market conditions.
Thank You :)

Presented by:
Mano, John Rhine
Marinas, Richelle
Medrano. Alljene