EC260 Study Guide - Comprehensive Final Guide: Budget Constraint, Indifference Curve, Marginal Revenue
Document Summary
Lesson 1. 1 introduction, math review and demand theory. Managerial economics framework that helps managers analyze their actions and its impact on the firms performance. Managers uses concepts and models to determine these things such as: cost, demand, profit, competition, pricing, compensation, strategic behaviour. Managers make decisions that will be beneficial to the firm over the duration of the firms existence. This is expressed through enpv (expected net present value of profits) Trt - tct / (1-i)t: tr = total revenue, tc = total cost, i = interest rate. Managers do not have total control over firm value, they are limited to operating constraints like scarce inputs, laws and contracts. What is profit and why should it exist: Economic profit is different than accounting profit. Economic profit refers to revenues that exceed the deductions of owner"s labour and opportunity cost. Can earn profit through innovations, managing risk and exploiting market opportunities.
