Nov. 25, 2021 / 2:00-4:30 PM / Module 1 / 1.

1 The Managers, Profits And Markets

INTRODUCTION TO MANAGERIAL
ECONOMICS
1.1. THE MANAGERS, PROFITS AND B. Recognize the nature and importance of profits
MARKETS -

soleProprietorship
person Corporation
1 requires 1M shares
-

manager is a
person who directs resources to achieve

Corporation
'

a stated goal .

different goal Partnership

-

sometimes managers may have

compared to stakeholders such as personal gain .

To prevent this .
managers can be awarded with
>

Accounting Profit
is the total amount of money taken in from sales
part stakes to encourage them to handle

Remind them that they ( total revenue

=

price ✗
quantity sold ) cost of
-

business properly .
can

be removed as a shareholder .
producing goods or services .

Hire outsiders such a] board of directors to

directions Total Revenue Price / unit ✗ Quantity sold
share their strategies
=
or .

it company goes bankrupt Accounting Profit total Revenue Expenses

=

Hostile take
-

over a ,

'

because of the managers mishandle .

1) Managers will be retired or ; shown in the income statement and are

typically reported
2) They can be demoted if a company by the firm 's accounting department .

absorbs their former company .

Economic Profit
'

Economics is the science of making decisions in difference between the total revenue and the total
the presence OF scarce resources .

opportunity cost of producing the firm 's good

Resources are anything used to
produce a good or services

or service or ,
to achieve a goal .

Economic Profit
=

total Revenue
-

total
opportunity
cost
Managerial Economics is the study of how to
direct scarce resources in the way that most Opportunity cost
'

cost of using includes both the :

efficiently achieve a managerial goal . a resource

to maximize household welfare to the resources OF

'

Explicit cost Lor accounting cost 7

out
firm to maximize profits of the resources
-

a .

Implicit cost cost OF giving up the best

' -

BASIC PRINCIPLES THAT COMPROMISE EFFECTIVE alternative use of the resources .

MANAGEMENT
A. Identify goals and constraints Opportunity cost > Accounting cost

goal maximize the profit it includes both the

explicit cacwunting costs)
• -

constraints make it difficult for managers and

any implicit costs
.
-

to achieve goat
Risks are uncertain events :
Implicit costs
1. Positive risk loppurtuni ties ) managers of large firms can use sources within the

Negative risk ( threats )

firm 's finance marketing and/
2.
company , including the , ,

or legal departments , to obtain data about the

implicit costs of decisions Managers must collect data .

on their own .
The Role Of Profits 3 sources of Rivalry
profits signal the owners of resources where the 1. consumer Producer
- -

resources are most highly valued by society .

consumer negotiates for a lower price while producers
IF the society need this product / service ,
then attempt to negotiate for a higher price .

it will have which can

larger profit help
companies decide You're also helping the 2. consumer consumer
-

welfare of the society by creating these Reduces the negotiating power of consumers

products .

Consumers will compete with one another for the right

to purchase the available goods .

Five categories or Forces that impact the sustainability consumers who has enough resources will be prioritized .

OF industry profits .

1.
Entry 3. Producer -

Producer

heightens the competition and reduces the margins when multiple sellers of a
product compete
of existing firms in a wide variety of industry Given that customer are scarce , producers compete for
settings .
the right to service the customers available [ best quality
2. Power OF input suppliers at the lowest price )
industry profits tend to be lower when suppliers
have the power to negotiate favorable terms 4. Government and Market

for their inputs When agents either side find themselves disadvanta
-

.
on

3- Power Of Buyers ged in the market process , they will attempt to induce

Industry profits tend to be lower when customers government to intervene on their behalf .

or buyers have the

power negotiate for the
to

products or services produced in the industry .

4. Industry Rivalry
E. Recognize the time value of
money
The profits
sustainability of industry also the timing of many decisions involves gap between
'
a

depends on the nature and intensity Of rivalry the time when the costs of a project are borne and

among firms competing in the

industry .
the time when the benefits of the project are

5. substitute and complements received .

the level and sustainability of industry profits

-
# 1
today is worth more than # I received in the future .

also depend on the price and value of interrelated .

The value of money may increase or decrease
'

products 9 services through time

-

C. Understand the Incentives F. Use Marginal Analysis

In effect changes incentive to states that optimal managerial decisions involve
in
profits provide an
' .

resource holden to alter their use of resources .

Comparing the marginal Cor incremental ] benefits

'
Incentives are given to those hardworking employees .
Of a decision with the marginal Cor incremental) costs .

D. Understand the market

'
this is where transactions happen
There are two sides to every transaction in the market :
'

For every buyer there is a seller .

The final outcome of the market process depends on

-

the relative power of buyers and sellers .

Bargaining position is the

power of customers and

producers in the market is limited by rivalry in

economic transactions .
 Scenario 1 / Implicit cost
Scenario 2
\
Mariah is a CPA professor earning a salary of P650,000 per year. Dendi is looking for a way to improve the efficiency of her business
-
However, due to the pandemic, she decided to start her Accounting process through an innovative machine.
firm. The cost of the innovative machine in P280,000.

In 2020, the result’s of Mariah’s business are as follows: If she will purchase the machine her business operation will be
-
Revenue P1,800,000 able to:
Staff salary P195,000 1. Increase the sales unit from 5,000 to 8,000 units.
i Other operating expenses P150,000 } Explicit cost 2. Decrease the opearting cost from P150,000 to P120,000

Other related data: The Sales price per unit is P1000.

Implicit cost
i.
Mariah used her P500,000 savings that were earning a 2% interest Requirements
per year to start the business. Explicit cost
\
She used the P500,000 to purchase the equipment and supplies 1. How much is the Economic profit?
for the firm. 50,000
2. Should Dindi purchase the innovative machine?
\
Before she started her business, Maria also owned a building which she
is renting out for P120,000 per year. implicit cost
-

Yes Di nai should the innovative machine

Mariah used the building she owned for her business.
.
,
purchase .

Implicit cost -

things you need to give up

Explicit cost wit used to start your business
-

In 2021, Mariah was trying to decide if she should stay in business or

go back to teaching

Requirements

1. How much are the explicit costs?

845,000

2. How much are the implicit costs?

780,000

3. How much is the Accounting profit?

1. NO 000 ,
-

845,000 =
995,000

4. How much is the Economic profit?

995,000 -

780,000 = 1751000

5. What should be the decision of Mariah?

Yes , Mariah should continue her business because

her Economic profit of 175,000 earns more than

in teaching .
Nov. 27, 2021 / 2:00-4:00 PM / Module 1 / 1.2 Demand, Supply and Market Equilibrium

MODULE 1
MANAGERS/PROFITS/MARKETS/DEMAND AND SUPPLY/
EQUILIBRIUM
rises and all other consumer Expectations
Law Of Demand as the price
-

things remain constant , the quantity demanded It consumers suddenly expect the price to be
they will substitute current
Of the good fall .
higher ,
purchases for future
purchases .

Market Demand Curve indicates the total quantity of stockpiling generally occurs when products are

durable in nature
a
good all consumers are willing to purchase
.

→
increase in demand
←
decrease in demand
DEMAND FUNCTION FOR GOODS
QQ = f- ( Px Py M H
, ,
, )
DEMAND SHIFTERS Where :

to QQ
Income affects the ability of purchase quantity demanded of good
=

consumers ✗ .

Px
good changes in income affect how much price of good
=
a ,
✗

at PY
will buy any price price of related good
=
consumers .
a

M =
income
H
two types of Goods other variable that affects demand
=
: value of any
1. Normal Goods are those whose demand increases
when income increases Linear demand
consumer .

function
QQ to ✗ Px toy Pytxm Mt AHH
Inferior Goods products that consumer purchase do
=

2. are

✗ is are
less of when their income rises and purchase more fixed numbers

Of when their incomes

f- all .

Note :

Prices Of Related Goods .

If ay is a Ct ) number ,
9 price of good Y =P in the

in the related goods generally therefore good is a

changes prices of consumption of good × ; , ✗

shift the demand curve

for a good . substitute for good y

Pepsi 9 coke )
'

1. substitute goods (ex .

'

It ay is a f) number .
9 price of good 4=4 in the

an increase in the price of one good increases the consumption of good × ; good ✗ is a complement to

Y
demand for the other goods .
good .

2. Complementary goods (ex Beer .

É Pretzels ) .

If am is a Ct ) number .
9 income ( M ) =
4 in the
consumption
an increase in the price would decrease the of good × , and good ✗ is a normal good .

quantity of the other .

'

It am is a f) number t income (M) ,

=
4 in the
consumption
OF good ×, and good ✗ is a
inferior good .

Advertising and consumer tastes Sample Problem

if advertisement shifts the curve to the QQ
in right 12,000-310×1-4 Py 1Mt 2 Ax
= -

Suppose good X sells for $200 per unit, good Y sells for $15 per unit,
Informative advertising provides information about
'

the company utilizes 2,000 units of advertising, and consumer income

is $10,000. How much of good X do consumers purchase? Are goods
the
product , which in turn induces more consumers
X and Y substitutes or complements? Is good X a normal or an inferior
to good?
buy .

persuasive advertising influence demand altering

'

by QQ =
12,000-3120071-4 (157-1110,000)+212,000 )
the underlying tastes of consumers . =
12,000 -

6001-60-10,0001-4,000

Population =
5. 460 units

As the population rises , more and more individuals wish to

substitutes because t2A×

buy a given product ,
and this has the effect of shifting
Inferior because
-

IM
the demand curve to the right .
 Consumer surplus is the value consumers get from a good MARKET EQUILIBRIUM
but do not have to pay for It is the are above the price supply and demand are balance this is where the
.

paid for a good but below the demand curve .

and demand curve intersect

supply .

'

Equilibrium price . market price where the seller and buyer

SUPPLY
agreed .

Market is total quantity of good Equilibrium quantity total quantity traded at that price
-
the a
supply curve , .

that all producers would produce at each price .

Qd =
Qs
Imgaine that your are an aide to a senator on the Foreign Relations
change in
quantity supplied change in price
=

Committee of the U.S. Senate, and you have been asked to helo the
-
Movement along a
given supply curve .
committee determine the price and quantity that will prevail when competitive
forces are allowed to equilibrate the market. The best estimates of the market
Input prices technological advances can also lead to
'
or demand and supply for the good (in U.S. dollar equivalent prices) are given by
in
Qd = 10 - 2P and Qs = 2 +2P, respectively. Determine the competitive
change supply .

equilibrium price and quantity.

SUPPLY SHIFTERS QQ =
Qs

10 ZP 2 1- ZP
=
how willing
-

Input Prices much producers are to produce

- -

8 =
4P
at alternative prices .

¥
1 Government 8- = 4P
technology Regulations
-

4
Number Of Firms as more firms enter the industry
-
'

2 =P
more and more output is available at given price .

substitutes in production
•

-
Taxes
FLOOR PRICE
Producer Expectations Minimum price the government permit charge for a good
-
sellers to
-
.

'

surplus occurs when this price is above equilibrium

SUPPLY FUNCTIONS
QI =
1- ( Px Pr W ,
H ) Sample Problem
, ,

Given: Floor Price = P4.00

Where :

Px Qd =
10 ZP and Qs =
2 1- ZP
price of good
-

=
✗

Pr Answer
price of technologically related good Equilibrium price $2 < $4 Floor
=
:
price Surplus
. occurs .

W Qd 10-2147=2
price of input Quantity demanded is
=
an =

It =

value of some other variables Quantity supplied is Qs =

2 t 2 (4) =
to

10-2 8 units of surplus

=

Sample Problem
QI =
2,000 t 310×-4 Pv
-

Pw CEILING PRICE
Suppose TVs are sold for $400 per unit, conmputer monitors are sold for $100 Maximum price the government permits sellers to
-

per unit, and the price of an input is $2,000. How many television sets are charge for a

produced? good -

QI =
2,000 t 3 (4007 41100) -

112.0007
shortage
-

occurs when the price is below equilibrium

.
.

=
800 TVs

Sample Problem
Given: Ceiling Price = P1.50
Producer surplus
-

excess amount producers receive to induce

Qd = 10 -

ZP and Qs = 2 1- zp
them to produce the good .

Answer :
Equilibrium price $2 > $1.50 Ceiling price shortage .

occurs .

Quantity demanded is Qd =
10-211.503=7

Quantity supplied is Qs =
21-24.507=5

7- 5
=
2 units
of shortage .
Dec. 3, 2021 / 2:00-4:00 PM / Module 2 / 2.1 Marginal Analysis

MODULE 2
MARGINAL ANALYSIS AND CONSUMER BEHAVIOR
2.1. MARGINAL ANALYSIS Irrelevant costs

'
sunk costs are costs that has been paid and can't be
Not Benefit =
total Benefit -

Total cost
recovered .

-
Fixed costs must be paid no matter what level of activity .

Marginal Benefit is the additional satisfaction one .

Average costs cost per unit of activity

gains from additional unit of an activity
an .

to / # Of
activity
marginal cost is the additional cost from a activity These activities
.

are not needed for making decisions .

Marginal Net Benefit CMNB ) is MB > MC =

Yes

MBC MC
' =

NO CONSTRAINED OPTIMIZATION
MB Mo MNB
-
=

.
Most value 1 Best buy
MB_ marginal Benefit
=

p =

price
Sample Problems
The company will buy a new photocopy machine choosing between the
following brands:

A = 500,000 copies with cost of $2,500

B = 600,000 copies with cost of $4,000
C = 580,000 copies wiith cost of $2,600

500,000/2,500 =
200 copies 1$ I

600,000/4,000 =
150 copies / $1
580,00012 . 600=223 copies / $1

CONSTRAINED MAXIMIZATION
Net Benefit .

Maximize a total benefit subject by choosing two activities

Note :
TB To =
NB to constraint in the
-

form Of a budget that has a

When TB > TO we increase activity
1- B
=
40 + zy =P 64 .

limited spent .

When TB < TO we decrease activity

TC
=
14 t 14 =P 28 ,

This is why we must look at MNB Sample Problem

NB
=
64
-

28 =P 36
instead OF total .
Consider a situation in which there are two activities, A and B.

Activity A = $4/unit
Activity B = $2/unit
UNCONSTRAINED MAXIMAZATION Constraint = $100 on A and B combined.

The manager wishes to allocate $100 and currently choosing 20 units

OF A and 10 units of B.
-
= =/ >

(514×20) t (512×10) =
$100

MBA_ 10>5
1- =M¥_;
=
= =

4
Pa

10/9=2 :
for every increase
of 1 unit
for A ,
we can decrease

I
f- a small increase or decrease in activity causes net benefit 2 units of B.

to increase ,
then it's not a optimal activity .

'
the
activity should be increased if MB > MC CONSTRAINED MINIMIZATION
decreased it MB < Minimize constraint that the levels
.
MC total cost subject to
'
a a

.
Optimal level -

net benefits is maximized . Of activities be chosen

.

'
Occurs when MB =
MC or ;

when the level of activity is the last level for which MB > MC
-
Dec. 4, 2021 / 2:00-4:30 PM / Module 2 / 2.2. Theory of Consumer Behavior

Sample Problem

Consider a manager minimize the TC of two activities A and B.

Constraint: 3,000 units
Activity A = $5/unit
Acitivity B = $20/unit

100 units of A and 60 units of B.

( $5 ✗ 100 ) t (1820×60) =
3,000

MBa_
30-5--6>3 6% MpB;-
= = =

Pa
THE CONSUMER BUDGET CONSTRAINT
Activity A gives more
money
Budget Lines
2.2. THEORY OF CONSUMER BEHAVIOR Consumers normally have limited incomes and goods are not

free The constraint

.
can be graph .

CONSUMER BEHAVIOR Quantity

-
Consumer Pop $5 ✗ 1- $104 $1,000 income
1-
Opportunities
=
✗
- -

'
consumers can afford P ¥Y
'
What am I able to buy
2. consumer Preference
-
determine which goods will be consumed .

all on
spends
-
what I want to buy g. good -1

✗ Y

Utility Function

utility is the benefits consumers obtain from the goods

and senile they consume .

Utility Function is equation that shows indivi

-

an an x x

dual 's
perception of the
utility that level would
of
be attained from consuming bundle of goods :

U =
f- IX. Y )
To maintain the budget constraint $5 less must be
'

Where : spent on good Yi thus the consumer must give up 112 unit OFY .

f- =

function Of or depends on

✗
=

amount consumed Of goods ✗ Slope of the budget line = -

PI
" " "
y good , y Py
=

M =P ✗ ✗ t
Pyy
INDIFFIRENECE CURVES
Jet OF and services
INDIVIDUAL DEMAND AND MARKET DEMAND CURVES
points different goods
'

of bundles of .

Market Demand and marginal Benefit

'

Indifference curves are downward sloping A list of prices and the quantities at each price
✗ is
Indifference are convex because consumption of
•
curves

increased relative to consumption of Y .

Marginal Rate
of substitution maintains constant level
-
a

Of utility .

MRS dY_ /
=

I ✗ sum
of
QD each
Of
price
 Market = Market
Demand Benefit

nÉmers

The given data in the table

graph is based the
'
on .

X 0
To 11-0 IF

MY REFLECTION POLL QUESTIONS

1. The conduct of the course during conferences including the scheduling of quizzes and other NOV. 25, 2021/ 2:00 - 4:00 PM / MODULE 1 / 1.1 The Managers, Profits, and Markets
activities. Do you have any questions? NONE
Sometimes the lessons during the conferences are a little overwhelming, it contains too much Understood? YES
information. I recommend that maybe you can reduce the lessons per day so we can prevent Question? NONE
information overload.
3:02
2. The presentation of the canvas modules In? (after break) YES
I really like the modules used in conferences because it’s shorter and already summarizaed. Maybe Is the pacing just right? YES
you can give the lecture in advance so we can read it instead of reading the whole modules which Are you able to take down notes? YES
sometimes contains lessons that aren’t included in the lectures. Is the pacing just right? YES
? YES
3. Relevance of the activities to the topics discussed Give me example of financial statement. INCOME STATEMENT
The activities are really fun specially when it’s a group activity. The activity is relevant t the previous Understood? YES
discussed topic which makes it easier to answer. Are we still good? YES
Are you still with me? YES
4. What is the topic that really made an impact on you as a student and as a person? Please explain. Are you able to take down notes? YES
There is really no lesson that moved me as a person, but I assure that all lessons will be cherished as Accounting profit formula? YES
best as I can. Economic profit formula? YES
Back at 4:01 YES
5. The attitude of the teacher towards the student. Are you bored? NO
In conference, you are really sweet. However, sometimes it feels scary to approach you especiallty ? YES
when sending you a message because the tone of your message is sometimes intimidating. But I Opportunity cost formula? YES
really like it when you try to help us with our problems. Questions? NONE
? YES
6. Message to your teacher Have you answered the discussion? YES
Good Job! Keep it up! Is everything clear? YES
7. Self Assessment:
How was your performance this Prelim? Poor; I can barely understand some of the topic and the DEC. 3, 2021 / 2:00 - 4:30 PM / MODULE 2 / 2.1 Marginal Analysis for Optimal Decisions
scores of my quizzes and prelim exam is low. ? YES
? YES
What do youpromise to do to get a higher grade for the Midterm period? I will do advance readingof ? YES
the topics and I will fully focus on the discussions. ? YES
? YES
? YES
? YES
3:30
3:30
3:45
? YES
? YES
? YES
You have 3 shampoos A the cost is P 50 - 100 mi B the cost is P 60 -120 mi C the cost P 90 - 200
ml
SHAMPOO C
You have 3 shampoos A the cost is P 50 - 100 mi B the cost is P 60 -120 mi C the cost P 90 - 200
ml
A. 2 B. 2 C. 2.22
You have 3 shampoos A the cost is P 50 - 100 mi B the cost is P 60 -120 mi C the cost P 90 - 200
ml
A.2 B.2 C.2.22
Bye
THANK YOU MA’AM!
DEC. 4, 2021 / 2:00 - 4:30 PM / MODULE 2 / 2.2 Theory of Consumer Behavior
How are you feeling today? GOOD
no access? NO
no access? NO
no access? ACCESSIBLE
? YES
? YES
? YES
? YES
? YES
What is the formula for MRS? CHANGE IN Y/ CHANGE IN X
What is the formula for MRS? CHANGE IN Y/ CHANGE IN X
? YES
3:05
3:05
3:05
3:05
3:05
3:05
? YES
? YES
? YES
? YES
? YES
? YES
? YES
Type Done if you are finished with your group conference in the group homepage. DONE

TP / Units Of Labor

Even don't round Off

-

Odd round OFF

-

. 6351 -
round OFF
Date: Dec. 11, 2021 / Time: 2:00 - 4:27 PM / Module 3 Topic: Elasticity of Demand

MODULE 3
ELASTICITY/DEMAND, ESTIMATION AND FORECASTS
3.1 ELASTICITY OF DEMAND Elasticity can be measured by :

Midpoint Elasticity
-

I P
Price Elasticity Of Demand is consumer responsiveness to a f- =
✗ Average of
AP Q
price change .
Average of
Point Elasticity
-

E =
%dQ_
-

Quantity Demanded (% ✗ 100%) E= ✗I

100% ) AP Q
%dP -
Price ( ✗

Marginal Revenue
Example 10% price decrease causes consumers to increase
related to price elasticity because it involves changes in total
their
purchases by 30%

MR dTR_ total revenue

-
=

-1300k¥ .
=
-3
AQ -

quantity

Elasticity Table

Elasticity Responsiveness IEI

Elastic 1%dQ I > II. API IEI > 1

IEI =L
Unitary Elastic 1%4011=11 DPI .

☒☒
Inelastic 1%401<1%4 PI IE / < 1

Predating the
percentage change
p= -

16% E = -
5 P = 25% E s -

0.8

E
=
AP / AQ E=dP / AQ

5=-16%1 AQ -0.8 =
IP / 25%

AQ =
-16%1 -5% AP =
25% ✗ 0-8 Other Demand Elasticities
AQ =
-3.2% AP =
20% Income ( Em )
-

Elasticity
>

responsiveness of quantity demanded to changes in income

-

Elasticity measures the relative change in quantity -

a
positive income elasticity means the goods are normal

in
resulting in a change price or income a negative income elasticity means the goods are interior
-
.

Midpoint Point
Ave
=¥m aao¥
OI M

-8×1
Price Elasticity and total Revenue
Em
.

✗
Em =

Total total P
revenue expenditure by consumers on
=

the commodity .

TR =P ✗ Q Cross CEXR )
Elasticity
'
-

Price

Price and Quantity demanded has opposite effect

-

responsiveness of quantity demanded of good to

-

in the demand related

curve .

changes in the
price of a good R
'

changes in P and Q have opposite effect in TR means the two goods substitutes
positive are
-
.
a

a negative means the two goods are complements

-

Factors Affecting Price Elasticity Of Demand

Ave°t
E*=I¥× P
Availability substitutes
-

of
Ex, = ✗ ✗
'

Percentage of the consumer 's budget AB Ave .

OFQ ,

time Adjustments
'

period Of
Date: Dec. 16, 2021 / Time: 2:00 - 4:18 PM / Module 4 Topic: Short and Long Run Production Cost

MODULE 4
SHORT AND LONG RUN PRODUCTION COST
4.1. PRODUCTION COST IN THE SHORT RUN TFC cost that are the same at all levels of output
-

TVC cost that vary with the level of output

-

Production cost is the total cost incurred the production of TC

-

Jum of the firm's TFC and TVC at a level output

the goods .
MC -

Added cost of producing one more unit of output ; change

Fixed cost does not change regardless of the number of units in to associated with one more unit of
output .

produced ( salaries Rent ) ATC To

per unit OF output ; to divided by output
-

,
.
.

Variable cost changes based on the number of units produced AFC TFC per unit of output ; TFC divided by output
-

. .

( Raw labor ) 1- V0
per unit of output TVC divided
materials Avo ;
by output
-

,
.

Efficient production produces goods at a maximum output

4.2. PRODUCTION COST IN THE LONG RUN
without wasting much and at lower cost .

Production function quantity of inputs used and the quantity

of the actual good .

Short -

run is a fixed period because it may take years for

a company to expand a new plant .

Long run is a period long enough for the company to

-

make adjustments related to production .

Formulas

Production Analysis in the short Run Total Labor cost =

LO ✗ Labor unit

total Product CTP ) total quantity of a good produced total capital cost =
CC ✗ Capital unit
-

marginal Product CMP ) increase in output that arises TLC t TCC

=
total cost
-

From an additional unit of input

dTP_
ducal
Mp =
LAC =
TI LMG =

dQ
output
Average Product CAP ) output / Unit of labor input
-

AP =
TP_ Determinants for Economies of scale
L '
Labor specialization -

worker gain experience and specialize

in a certain field which could then be used in labor

The Law Of Diminishing Return productivity .

as more units are added to a fixed resource in some point Managerial specialization a
bigger firm could hire more
- .
-

the marginal product will decline .

professionals which leads to an increase in productivity .

'

Invisibility
-

Efficient capital utilization -

some capitals can be

used efficiently for a particular size .

Increased dimensions reduced cost by increasing the size

-
-

such as tankers and storage space .

Principle of multiples machines can work together

-

multiple
-

for efficient workload ,

their quantity must correspond to

each other to be effective .

By
-

Product
-

convert by product
-

into commercial goods

to increase commercial outputs .

'
Link economics of scope enables plant to
processes
-

produce more than one product .

 Purchasing Economies Of scale bigger firm buy in
-
-

can

bulk and obtain discounts and cheaper credit .

Marketing Economies Of scale big firms can benefit

-
'

from lower per unit marketing fees

-

Lower unit cost of Research and Development

'

per
-

staff facilities and Economies facilities like canteen ,

-

fitness center can help workers increase productivity .

Economies of scale and Long Run Average cost CLRAC )

'
In the long run ,
all costs are variable and the scale OF

production can change .

Economies of scale are cost advantages by expanding

-

the scale of production

.

'
Lower cost =

productive efficiency
=

competitive edge
Lead to positive sum game where welfare of both will
-

improve .
 ,

Jan 4,2022.
/ 2:00 -

4:30 PM / Module 5 Topic : Managerial

Decisions in
competitive market

Perfect competition
Price taken ; firms must take in their
a certain price
market ( market equilibrium ]

Homogeneous products ; all firms has the same time frame

You have the same product ,
you can't influence the

price .

YOU have to produce minimize wit .

Entry and exit unrestricted

Manager in short :
produce or shutdown
-

run

monopoly firm can dictate the price 1 Meralco Maynila d)

-

less elastic
-

Oligopoly firms with few competitors they sometimes cooperate

-

to reach certain goal .

interdependent
-

Profit Margin Contribution Margin )

'
PM :
price
-

Atc ( Average total cost )

•
When all units of output are in the same price :
'
PM =
AP ( Average Profit )

Average Profit
AP =
I
-

Profit
Q -

output
-
measures profit per unit

Break -

even points

Output levels where P ATC

' =

-
p -

ATC =
O

'
TR =
TO

The Output Decision

PC ATC for all levels

output
TR < TC loss
=

choose an output level :

either zero output

-
or

•
a positive output that will minimize the loss in the short

run .

Principle
'
continue .
shutdown

TR IT V0 Loss ? TFO

P >_ AVC TR < Tvc

Pc AVC