ECON 3411 Lecture Notes - Lecture 3: Opportunity Cost
Document Summary
Profits signal to resource holders where resources are most highly valued by society. Resources will flow into industries that are most highly valued by society. The five forces framework: figure 1-1 page 8. Incentives play an important role within the firm. Managers must understand the role incentives play in the organization. Constructing proper incentives will enhance productivity and profitability. Understand markets: t(cid:449)o sides to e(cid:448)er(cid:455) (cid:373)arket tra(cid:374)sa(cid:272)tio(cid:374): buyer (consumer). Seller (producer): bargai(cid:374)i(cid:374)g positio(cid:374) of (cid:272)o(cid:374)su(cid:373)ers a(cid:374)d producers is limited by three rivalries in economic transactions: consumer-producer rivalry. Producer-producer rivalry: go(cid:448)er(cid:374)(cid:373)e(cid:374)t a(cid:374)d the (cid:373)arket. The time value of money: ofte(cid:374) a gap e(cid:454)ists (cid:271)et(cid:449)ee(cid:374) the ti(cid:373)e (cid:449)he(cid:374) (cid:272)osts are borne and benefits received. Present value analysis: prese(cid:374)t (cid:448)alue of a si(cid:374)gle future (cid:448)alue the amount that would have to be invested today at the prevailing interest rate to generate the given future value: