CHAPTER 1 - INTRODUCTION TO ECONOMIC DECISION MAKING
Opening quote, see page 1. Decision making is at the heart of most important business and govt. problems. Examples: High-tech company: Undertake a promising but expensive R & D program? Petrochemical Manufacturer: Cut price in response to increased competition? Telecommunication Co: What bid to make for govt. contract? Food company: Introduce a new food product after mixed test-marketing? Fed Govt.: Stricter rollover standards for SUVs? City Govt.: Allocate funds to construct harbor tunnel for increased traffic flow? Fed Govt.: Increase funding for cancer research? Important question: “What is the alternative?” All decisions are economic decisions involving what comparison? Managerial Economics (ME) is the analysis of major management decisions using the tools and concepts of economics: supply and demand and cost, resource allocation, efficiency, cost-benefit, trade-offs, competition, strategic behavior, industry organization, m..