Question

** (a) (i) What is Managerial Economics?

(ii) What is the scope of Managerial Economics?

(iii) As a CEO of a company, of what relevance is Managerial Economics to you?

(b) Define and give an example of each of the following demand terms and concepts and illustrate diagrammatically a change in each.

(i) Demand

(ii) Normal good

(iii) Inferior good

(iv) Substitute good

(v) Complementary good

(c) The market demand for brand X has been estimated as

Qx= 1,500 – 3Px – 0.05I- 2.5Py + 7.5Pz,

where Px is the price of the brand X, I is per-capita income, Py is the price of brand Y, and Pz is the price of brand Z.

Assume that Px = $2, I = $20,000, Py = $4, and Pz =$4

(i) With respect to changes in per-capita income, what kind of good is brand X?

(ii) How are brands X and Y related?

(iii) How are brands X and Z related?

(iv) How are brands Z and Y related?

(v) What is the market demand for brand X?

Answer 1

A) i) Managerial economics refers to the application of the economic theories and economic analysis to the problems of formulating rational managerial decisions.

ii) managerial economics are applied to business analysis which could be used to analyze the business environment to find the solutions of the practical problems.

iii) being the CEO is the company, managerial economics helps to understand how to access and utilize the scarce resources to ensure optimal performance of the same to generate revenues and profits.