+Managerial Economics & Business Strategy

Chapter 1
The Fundamentals of Managerial
Economics

McGraw-Hill/Irwin
Michael R. Baye, Managerial Economics and
Business Strategy Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved.
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+
Managerial Economics

 Manager
 Seseorang yang mengarahkan sumber daya untuk mencapai tujuan yang
dinyatakan.

 Economics
 Ilmu membuat keputusan di hadapan sumber daya yang langka.

 Managerial Economics
 Studi tentang bagaimana mengarahkan sumber daya yang langka dengan
cara yang paling efisien mencapai tujuan manajerial.
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Economic vs. Accounting Profits

 Accounting Profits
 Total revenue (sales) minus dollar cost of producing goods or services.
 Reported on the firm’s income statement.

 Economic Profits
 Total revenue minus total opportunity cost.
+ Opportunity Cost
1-4

 Accounting Costs
 The explicit costs of the resources needed to produce produce goods or
services.
 Reported on the firm’s income statement.

 Opportunity Cost
 The cost of the explicit and implicit resources that are foregone when a
decision is made.

 Economic Profits
 Total revenue minus total opportunity cost.
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Profits as a Signal

 Profit (keuntungan): Sinyal bagi pemegang sumber daya di mana

sumber daya dinilai paling tinggi oleh masyarakat.
 Sumber daya akan mengalir ke industri yang paling dihargai oleh
masyarakat.
Marginal (Incremental) Analysis 1-6

 Control Variable Examples:

 Output
 Price
 Product Quality
 Advertising
 R&D

 Basic Managerial Question: How much of the control variable should

be used to maximize net benefits?
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Net Benefits

 Net Benefits = Total Benefits - Total Costs

 Profits = Revenue - Costs

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Marginal Benefit (MB)

 Change in total benefits arising from a change in the control variable, Q:

B
MB 
Q
 Slope (calculus derivative) of the total benefit curve.
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Marginal Cost (MC)

 Change in total costs arising from a change in the control variable, Q:

C
MC 
Q
 Slope (calculus derivative) of the total cost curve
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+ Marginal Principle

 To maximize net benefits, the managerial control variable should be

increased up to the point where MB = MC.

 MB > MC means the last unit of the control variable increased benefits
more than it increased costs.

 MB < MC means the last unit of the control variable increased costs
more than it increased benefits.
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+ The Geometry of Optimization: Total
Benefit and Cost
Total Benefits Costs
& Total Costs
Benefits
Slope =MB

B
Slope = MC
C

Q* Q
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+ The Geometry of Optimization: Net
Benefits
Net Benefits

Maximum net benefits

Slope = MNB

Q* Q