MGE 302 Lecture Notes - Lecture 1: Risk Premium, Profit Margin, Opportunity Cost
Document Summary
Managerial economics applies microeconomic theory the study of the behavior of individual economic agents to business problems in order to teach business decision makers how to use economic analysis to make decisions that will achieve the firm"s goal maximization of profit. Economic theory helps managers understand real-world business problems by using simplifying assumptions to abstract away from irrelevant ideas and information and turn complexity into relative simplicity. Microeconomics is the study and analysis of the behavior of individual segments of the economy: individual consumers, workers and owners of resources, individual firms, industries, and markets for goods and services. Using marginal analysis, microeconomics provides the foundation for understanding the everyday business decisions managers routinely make in running a business. Such decisions are frequently referred to as business practices or tactics. Industrial organization is a specialized branch of microeconomics that focuses on the behavior and structure of firms and industries.