1 / 43

Chapter 2 Optimal Decisions Using Marginal Analysis

What is economic optimization?. If there is only one solution to a problem, then, there is no decision problem.If there are alternative solutions, then you have to decide about the ?best" solution.The best (optimal) solution is one that produces the result most consistent with the managerial objec

lona
Download Presentation

Chapter 2 Optimal Decisions Using Marginal Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

    1. Chapter 2 Optimal Decisions Using Marginal Analysis

    2. What is economic optimization? If there is only one solution to a problem, then, there is no decision problem. If there are alternative solutions, then you have to decide about the “best” solution. The best (optimal) solution is one that produces the result most consistent with the managerial objectives.

    3. Economic Optimization Economic optimization is the process of arriving at the best managerial decision. Managerial economics provides tools for analyzing and evaluating decision alternatives.

    4. Primary Objective of Management In managerial economics, the primary objective of management is assumed to be maximizing the value of the firm Maximize the following equation:

    5. Total, Average, and Marginal Relations In any mathematical relationship, there is a “DEPENDENT VARIABLE” and one or more “INDEPENDENT VARIABLE(S)”. A marginal relation is the change in the dependent variable caused by a one-unit change in an independent variable.

    6. Total, Average, and Marginal Relations

More Related