Managerial Economics

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How to Lead Your Competitors: The Stackelberg Model of Duopolies in Managerial Economics

Changing the assumptions of how firms react to one another changes the decision-making process. In the Stackelberg model of duopoly, one firm serves as the industry leader. As the industry leader, the [more…]

How to Calculate Present Value with Time Value of Money

There are articles that say a dollar today is worth only 25 cents. The idea of the time value of money sounds somewhat absurd, and it is. But it’s really important to recognize what happens to money over [more…]

The Economic Relationship between Quantity Sold and Prices

In managerial economics, the relationship between how much customers must pay for an item and how much customers buy is called demand. More precisely, demand shows the relationship between a good’s price [more…]

The Economic Relationship between Quantity Supplied and Prices

Supply describes the economic relationship between the good’s price and how much businesses are willing to provide. Supply is a schedule that shows the relationship between the good’s price and quantity [more…]

How to Determine Price: Find Economic Equilibrium between Supply and Demand

Business executives face an economic dilemma in determining price: Customers want low prices, and executives want high prices. Markets resolve this dilemma by reaching a compromise price. [more…]

How to Determine Price When Supply or Demand Curves Shift

Economic markets tend toward equilibrium, the price and quantity that correspond to the point where supply and demand intersect. But equilibrium itself can change. [more…]

How to Use Functions to Describe Economic Relationships

Graphs easily describe the economic relationship between two variables; for example, a supply curve describes the relationship between price and quantity supplied. Economic relationships are also expressed [more…]

Basic Calculus Rules for Managerial Economics

Here is a brief refresher for some of the important rules of calculus differentiation for managerial economics. While calculus is not necessary, it does make things easier. [more…]

How to Use Partial Derivatives in Managerial Economics

In most instances, two variable functions are too simplistic to describe a situation adequately when it comes to using calculus in managerial economics. When functions have three or more variables [more…]

How to Use the Langrangian Function in Managerial Economics

Business situations are further complicated by constraints, which can be accounted for in managerial economics using the Lagrangian function. Perhaps the business has signed a contract to produce 1,000 [more…]

How to Determine the Price Elasticity of Demand

Mastering managerial economics involves calculating values, with the ultimate goal of determining how to maximize profit. The usefulness of the price elasticity of demand depends upon calculating a specific [more…]

Price Elasticity and Demand in Managerial Economics

Total revenue equals the good’s price multiplied by the quantity sold. Because the price elasticity of demand shows the relationship between price and quantity sold, the elasticity number captures all [more…]

How to Determine Income Elasticity of Demand

Calculating the income elasticity of demand is essentially the same as calculating the price elasticity of demand, except you’re now determining how much the quantity purchase changes in response to a [more…]

Cross-Price Elasticity of Demand in Managerial Economics

The cross-price elasticity of demand measures the responsiveness of a good’s demand to changes in the price of a second good. In managerial economics, this relationship is crucial because the amount of [more…]

How to Determine the Advertising Elasticity of Demand in Managerial Economics

The advertising elasticity of demand measures the responsiveness of a good’s demand to changes in spending on advertising. The advertising elasticity of demand measures the percentage change in demand [more…]

How to Calculate Price Elasticity of Demand with Calculus

The most important point elasticity for managerial economics is the point price elasticity of demand. This value is used to calculate marginal revenue, one of the two critical components in profit maximization [more…]

Managerial Economics: How to Satisfy the Customer

The famous movie line “If you build it, he will come” doesn’t work for businesses, and it’s the job of managerial economics to determine whether the customer will purchase the item your company is selling [more…]

How to Use Calculus with Consumer Choice in Managerial Economics

You can use calculus and the Lagrangian function in managerial economics to maximize utility. Remember, utility is the amount of satisfaction an individual receives from consuming a good. [more…]

How to Use Managerial Economics to Influence Consumer Choice

Understanding consumer behavior helps you in determining how to influence it. After all, your goal is to maximize profits, but to do that, you have to have customers purchase your product. Consumers make [more…]

How to Use Single Input Production Functions in Managerial Economics

Production functions typically have more than one input; however, in the case of a single input production function, you assume that the quantity employed of only one input can be varied. In other words [more…]

How to Use Multiple Input Production Functions in Managerial Economics

Multiple-input production functions allow you to account for more complexity in your firm’s decision-making processes. Although single-input production functions are useful for illustrating many concepts [more…]

How to Determine Impact of Technological Change in Managerial Economics

An important piece of managerial economics, technological change alters the firm’s production function by either changing the relationship between inputs and output or introducing a new product and therefore [more…]

How to Calculate Expected Cost of Development for New Products in Managerial Economics

Typically a new product or new production technique isn’t successful. Because of the high risk and likelihood of failure, you can often reduce research and development costs by simultaneously working on [more…]

How to Calculate Research and Development Timelines in Managerial Economics

An important factor influencing research and development costs is how much time you take for the project’s completion. A shorter time frame tends to increase research and development cost because you require [more…]

How Managerial Economics Accounts for Technology Diffusion

The diffusion of new technology introduces a crucial time element into managerial decision-making. You may be interested in how an innovation is going to affect your firm’s production costs over time. [more…]


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