In the first week of “Managerial Economics”, I gained different knowledge regarding the opportunity cost, circular flow model, production possibility frontier (PPF), demand and supply, economic system etc. The first week of Managerial Economics was really enlightening and inspiring for me. Economics is a study of the allocation and utilization of scarce resources to satisfy the unlimited human wants.
The concepts learned in this week are explained briefly below:
· Opportunity Cost:
is the forgotten alternatives of choices made. In order words, it represent the
benefits an individual, investor or business misses out on when
choosing one alternative over another
· Production Possibility Frontier (PPF):
It is a locus which gives the possible quantity of outputs in given quantity of factors inputs. It shows the maximum combination of outputs that the economy can produce using available resources.
· Circular Flow Model (3 sectors and 3 markets):
This model helps to show the flow of money and goods and services in a capitalist economy. The sectors of this model are Households, Business and Governments sectors. Households involve all people who are looking to satisfy the wants and needs. Business involves the institutions who undertake the task of combining resources to produce goods and services. Similarly, Government involves the ruling bodies of state that passes the laws. Collect taxes. The 3 markets in this model are Factor market, Goods and Services market and Foreign Exchange market.
· Demand and Supply:
week I learned about the law of demand and law of supply. Demand is the
function of price. The law of demand shows the inverse relation between the
price and quantity demanded
Law of supply says that the supply varies directly with the price. It may be
expressed as, “Higher the price, Higher shall be supply” and “Lower the price,
lower shall be supply”
· Law of Diminishing Marginal Utility:
According to this law, when a consumer gets more and more unit of a commodity, the utility desires from additional units goes on diminishing (Farrell, 1957). It is one of the most important causes of law of demand.
· Economic System:
In this week of “Managerial Economic”, I learned about the types of economic system that are based on the allocation and distribution of resources. The types of economic systems are capitalism, communism and socialism. Capitalism is a free market that ever earns the money, enjoys the money. Communism is the system where the income is distributed by the state equally to every individuals and the ruling bodies i.e. government decides how to use the money. Similarly,
Application of learned concepts into future entrepreneurial endeavor
future aim is to be a successful entrepreneur. These learned concepts will
definitely help in my future entrepreneurial career. Organizations make a
variety of decisions on a daily basis: choosing the appropriate amount of
inventory, balancing cash flows and selecting the ideal marketing plan are just
a few. However, since decisions involve the elimination of one or more options,
tradeoffs are usually attendant. Incurring opportunity costs is not inherently
bad, as they do not detract from business decisions; instead, opportunity costs
often enhance the decision-making process