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Economics: Unlimited Wants Scarcity
Economics: Unlimited Wants Scarcity
best alternative
Highest value alternative forgone whenever a choice is made
MACROECONOMICS vs MICROECONOMICS
Managerial Economics
Use of economic concepts and quantitative methods to
solve management decision problems
services
Business enterprise represents a series of contractual
goal
The theory of the firm is the microeconomic concept founded
in neoclassical economics that states that firms exist and
make decisions to maximize profits. Firms interact with the
market to determine pricing and demand and then allocate
resources according to models that look to maximize net
profits.
Inthe theory of the firm, the behavior of any
business entity is said to be driven by profit
maximization. This theory governs decision
making in a variety of areas including resource
allocation, production technique, pricing
adjustments, and volume production.
Thetheory of the firm works side by side with the
theory of the consumer, which states that consumers
seek to maximize their overall utility. In this case,
utility refers to the perceived value a consumer places
on a good or service, sometimes referred to as the
level of happiness the customer experiences from the
good or service.
The firm can be viewed as a series of contractual relationships that connect suppliers,
investors workers and management in a joint effort to serve the customers
Society
Investors
Suppliers
FIRM
Employees
Management
Customers
The firms owner-manager is assumed to be working to
maximize the firm’s short-run profits.
The emphasis on profits has been broadened to encompass