MANAGERIAL ECONOMICS (BMME 5103) MAJOR COURSE ASSIGNMENT ONE

QUESTION 1 (a) Some economic conditions that are relevant in managerial decision making are: When there is economic resection that is where some factors are not performing well and the economics indicators and affected. The managerial decisions are also relevant when there is high production. It also helps to company to take decision when they want to maximize profit. When inflation is high, managerial economic decisions are very important. This is also very important when a company makes a lost.

(b) Some risk faced by firms are characterized by the following. Liquidity risk is steaming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Market Risk mean day-to-day potential for an investor to experience losses from fluctuations in securities process. Financial risk is a risk that a company would not have adequate cash flow to meet financial obligations. Capital or technological investment risk is where funds have been invested in this areas and returns cannot be assured.

(c) The three basic economics questions relates to the firm as to what The company is to produce the necessary assessment done to know what exactly to produce. How the above product is to be produce. The technology, materials, human resource etc. Who this product is to be produce for market research and analysis to be completed.

(d) Other business area that are related to managerial economics are the Accounting department Human resource department Managerial To help them in their decision making.

QUESTION 2 A) Demand is defined as quantity of goods or services that consumers are willing to purchase at a particular price in a given period of time. Market demand curve is a horizontal sum of the individual demand curve.
Price Of Goods Po

Qo

Quantity

Considering the figure above, consumers are willing to buy product Qo at Price Po. Supper imposing the supply curve on demand curve above, the market equilibrium price is shown below.:

Price D E E (P)

E (Q)

Quantity

DD is the demand curve and SS is the supply curve. Demand and supply, the equilibrium price is established at R(p) and Equilibrium Quantity at E(Q) When consumers expect that the price of the goods will be higher in the future, curve dd will increase

B) Considering the rise in the price of substitute good, depends on whether the substitute good is directly, related or complementary. Concerning directly related goods such as coffee and tea, if the price of coffee rises, the demand for tea will increase.

For complementary goods, prices are inversely related. If the price of a complementary goods increases, the dd for the substitute decreases. For example, if the price of ice cream rises, the demand for ice cream toppings will decrease.

C) When consumer income falls for normal goods, there will be a decrease in demand for that good.

D) When consumer income falls and the good is infunor, the demand for the good will increases. For instance the demand for gari will increase when the consumer income falls.

E) If a medical report is published showing that a good is hazardous to ones health then the consumer preference for that good will unfavorably change leading a decrease in demand F) When price of the good rises, there will be decrease in dd of the goods. Considering the dd curve belows.

D P2 P1 D

Q2

Q1

When price increase from P1 to P2, the dd falls from Q1 to Q2

Given

(3) QD = 5,000 + 0.5 + 0.2A loop and Q5 = -5000 + 100P @ A= GH S 10,000 and I=GH S 25,000 (4) Give the initial up of price of coffee is GH S 1.0 aw dd at that price is 400 cups. Given also that if The price fall to GH S 0.90, the quantity added will increase to 500 (a) Arc price elasticity of dd is given by Q2 - Q1 (Q1 + Q2) /2 P2 P1 (P1 + P2)/2 Where Q1 = Initial quantity Q2= Final quantity P1= Initial Price P2= Final price = 400 = 500 = 1.00 = 0.90

Arc price Elasticity of demand of coffee (ED) =500 - 400 (400 + 500) /2 0.90 1.00 ( 1 + 0.90)/2 = 100 450 -0.1 0.95 = 0.222 = - 2.11 -0.105

(b) In this case, the demand for coffee is inelastic because the price change will course less than a change in quantity demanded.

(c)

QUESTION 1 (a) Some economic conditions that are relevant in managerial decision making are: When there is economic resection that is where some factors are not performing well and the economics indicators and affected. The managerial decisions are also relevant when there is high production. It also helps to company to take decision when they want to maximize profit. When inflation is high, managerial economic decisions are very important. This is also very important when a company makes a lost.

(b) Some risk faced by firms are characterized by the following. Liquidity risk is steaming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Market Risk mean day-to-day potential for an investor to experience losses from fluctuations in securities process. Financial risk is a risk that a company would not have adequate cash flow to meet financial obligations. Capital or technological investment risk is where funds have been invested in this areas and returns cannot be assured.

(c) The three basic economics questions relates to the firm as to what The company is to produce the necessary assessment done to know what exactly to produce. How the above product is to be produce. The technology, materials, human resource etc. Who this product is to be produce for market research and analysis to be completed.

(d) Other business area that are related to managerial economics are the Accounting department Human resource department Managerial To help them in their decision making.