ECON Lecture Notes

Managerial economics in the 21st • time
• money
century • energy
• and other resources to maximize our
The economic way of thinking well-being.
3. Marginal Analysis
In essence, before we choose a certain
alternative, we often ask ourselves if this will be
“beneficial or not” or “should we pursue this
action or not.” In the economic perspective,
these questions are also asked, but they are
also often answered in a unique way by using
an approach we call marginal analysis.
SUMMARY:
 There are many ways to depict how
economists think, 1. Economics is a study of how society
1. Decision making during scarcity. manages its resources and is concerned with
2. Rational behavior the efficient and effective allocation of said
3. Marginal analysis resources.
2. The branches of economics are
1. Decision making during scarcity. microeconomics and macroeconomics.
Because of scarce resources decision
3. Opportunity cost is that the cost of
makers should decide what to have and what
something is what we forgo to get it.
to forgo. This is the reason why we hear an
economist say, “There is no such thing as free 4. Production possibilities frontier
lunch.” The idea is simple: You may get treated represents points at which an economy is most
to lunch by a person, so it is “free” for you, but efficient producing its goods and services.
it will be a cost to someone else. Up to the
5. Utility is to measure one’s pleasure,
extent that it could also affect the society.
happiness, or satisfaction.
Opportunity cost is the cost we forgo to

Chapter 2: demand and supply
getting something else.
• Market is a term that is relative based on
the industry where one is involved.
2. Rational Behavior
• Market is place where buyers and
In economics, one of the assumptions
sellers meet.
we always acknowledge is that human behavor
reflects “rational self- interest. • Demand is the schedule of quantities of
goods or services at a certain area that people
Utility in economics is an individual’s
are willing and able to buy at different prices.
pleasure, happiness and satisfaction. these are
the things where we have allocated our:
• The law of demand states that as price they immediately have the intuition that the
increases, quantity demand will decrease. prices of almost all of the commodities will
Demand can be affected by: increase as well.
1. Income
PRICE OF RELATED GOODS AND
2. Price of related goods and services
SERVICES
3. Taste and preference
The price of related goods and services
4. Expectation on future prices
has a positive or negative impact on the supply
5. Changes in population
of a commodity, depending on its type.
EXPECTATION ON FUTURE PRICES

 Normal goods- are goods and services
We often hear about the word “hoarding”
that have an increasing demand
whenever income increases. Meanwhile
 inferior goods are goods or services that CHAPTER 3: ELASTICITY AND ITS
are decreasing whenever income APPLICATION
increases.
ELASTICITY
Price of related goods could be either a  Is a measure of the impact of one
substitute good or a complementary good. variable over the other.
Substitute goods are commodities that can
 Is a quantitative measure of the impact
replace another commodity in its absence.
of one variable over the other.
Meanwhile, complementary goods are goods
that go hand in hand with each other.
THE CROSS-PRICE ELASTICITY OF
DEMAND
 Supply- is the quantity of goods or
is the measure of percent increase in
services sellers are willing and able to the quantity demanded of goods and services.
sell at different prices.
In measuring goods and services using
The law of supply states that as price PED OR Price Elasticity of Demand
increases, quantity supply will increase. Supply
can be affected by: CROSS-PRICE ELASTICITY OF DEMAND
MEASURES
1. Input price Whether the good or service is a
2. Price of related goods and services substitute or a complement.
3. Expectation on future prices.
4. Technology
5. Government regulations
6. Number of suppliers
7. Unexpected calamities or natural
disasters.
OTHER FACTORS AFFECTING SUPPLY
INPUT PRICE
Whenever people hear that the
price of oil in the world market will increase, EQUILIBRIUM
is a state in which opposing forces or SUPPLY- is the quantity of goods or services
influences are balanced. "The maintenance of sellers are willing and able to sell at different
social equilibrium" prices.
ELASTICITY- is a quantitative measure of the

impact of one variable over the other.
ELASTICITY
Is ability of a deformed material body to
return to its original shape and size when the
forces causing the deformation are removed. A
body with this ability is said to behave (or
respond) elastically.
CROSS-PRICE
Cross- price elasticity measures how
sensitive the demand of a product is over a
shift of a corresponding product price. Often, in
the market, some goods can relate to one
another. This may mean a product's price
increase or decrease can positively or
negatively affect the other product's demand.
MARKET- is a place where buyers and sellers

meet.
DEMAND- is the schedule of quantities of

goods.
NORMAL GOODS- are goods or services that

have an increasing demand whenever income
increases.
SUBSTITUTE GOODS or a supplementary

goods are commodities that can be replaced by
another commodity in its absence.

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Managerial economics in the 21st • time

Opportunity cost is the cost we forgo to

EXPECTATION ON FUTURE PRICES

OTHER FACTORS AFFECTING SUPPLY

ELASTICITY- is a quantitative measure of the

MARKET- is a place where buyers and sellers

DEMAND- is the schedule of quantities of

NORMAL GOODS- are goods or services that

SUBSTITUTE GOODS or a supplementary

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