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.
concepts learned in this week are explained briefly below:
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 (Kennon, 2018).
Possibility Frontier (PPF):
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.
Flow Model (3 sectors and 3 markets):
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
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 (Chappelow, 2017).
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” (Chappelow, 2017).
of Diminishing Marginal Utility:
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.
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 (Capozzi, 2018). Opportunity costs
will allow me to make the decisions regarding the spending of the money
systematically for any capital expenditure process or investments.