“Managerial Economics" by Paul G.

Keat & Philip Young

CHAPTER 1
This Chapter introduces the subject of managerial economics and its relevance to business
decision making. The authors define managerial economics as the application of economic
principles and methods to the decision-making process within organizations. They explain
that the focus of managerial economics is on using economic analysis to identify the most
efficient and effective ways to allocate scarce resources in order to achieve a firm's goals.

The authors highlight the differences between managerial economics and other branches of
economics, such as microeconomics and macroeconomics. They explain that managerial
economics considers the institutional and regulatory environment in which a firm operates,
whereas microeconomics and macroeconomics focus on broader economic systems and
trends. They emphasize the importance of considering data and quantitative analysis in
decision making and the role of economic reasoning in making informed decisions.

The chapter covers the goals and objectives of a firm and how managerial economists can
help managers achieve these goals. The authors explain that a firm's goals may include
maximizing profits, increasing market share, or improving customer satisfaction, among
others. They note that it is important to consider trade-offs and balance short-term and long-
term considerations when making decisions.

The authors discuss the importance of considering external factors, such as competition and
market conditions, when making decisions. They explain how market structures, such as
monopolies and oligopolies, affect the behavior of firms and how firms can respond to
changes in market conditions through strategic decisions.
In addition to covering the basics of managerial economics, the authors also provide an
overview of the tools and techniques used in the field. They explain how to use supply and
demand analysis to make informed decisions, and how to evaluate the effects of different
pricing strategies on a firm's profits. They also discuss how to use cost-benefit analysis to
evaluate investment decisions and how to evaluate the effects of market structure and
government regulations on a firm's behavior.

This Chapter also discusses the basic economic questions that all countries face due to scarcity
and the different processes used to make allocation decisions. The three processes discussed
are the market process, which uses supply, demand, and incentives; the command process,
which uses the government or a central authority; and the traditional process, which uses
customs and traditions. These processes are used to answer the questions of what to
produce, how to produce it, and for whom it will be produced.

The chapter concludes by summarizing the key concepts covered, including the definition of
managerial economics, the importance of economic analysis in decision making, and the role
of managerial economists in achieving a firm's goals. The authors emphasize that managerial
economics provides a framework for making informed decisions in organizations and helps
managers understand the trade-offs and consequences of their decisions.

In conclusion, Chapter 1 of "Managerial Economics" provides a comprehensive introduction

Chapter 3 of "Managerial Economics" by Paul G. Keat and Philip Young focuses on the demand
side of microeconomics and its impact on firms' decision making. The chapter begins by
defining demand and explaining how it is measured. The authors explain that demand refers
to the quantity of a good or service that consumers are willing and able to buy at a given price.
The relationship between demand and price is modeled using a demand curve, which shows
the quantity of a good or service that consumers are willing to buy at different prices.

The chapter then discusses the factors that influence demand, including consumer income,
consumer tastes and preferences, consumer expectations, the prices of related goods, and
consumer demographics. The authors explain how changes in these factors can affect the
demand for a good or service and the shape of the demand curve. They also provide an
overview of elasticity of demand, which measures the responsiveness of demand to changes
in price.

The authors then discuss the concept of market demand and its importance in decision
making. They explain that market demand represents the total quantity of a good or service
that consumers are willing and able to buy in a given market, and that understanding market
demand is essential for making informed decisions about production and pricing. The chapter
covers methods for estimating market demand, including surveys, experiments, and
observational studies.

The chapter also covers the importance of demand forecasting in decision making. The
authors explain that demand forecasting involves predicting future demand for a good or
service based on historical data and trends, and that accurate demand forecasting is essential
for effective production planning and pricing decisions. The chapter provides an overview of
the different methods used for demand forecasting, including time-series analysis, regression
analysis, and causal analysis.
The chapter concludes by discussing the importance of understanding demand in a global
context. The authors explain that firms operating in a global market must understand the
demand for their products in different countries and regions, and must take into account
differences in consumer tastes, preferences, and buying habits. They emphasize the
importance of considering the cultural, legal, and economic factors that may affect demand
when making decisions about production and pricing in a global market.

In Conclusion, the chapter provides an overview of the key concepts of supply and demand.
It starts by defining the law of demand and the law of supply, which state that the quantity
demanded is inversely related to price and the quantity supplied is directly related to price,
respectively. The authors also examine the nonprice factors that impact demand and supply,
such as consumer tastes and preferences, income, prices of related products, and future
expectations.

In addition, the chapter provides both numerical and graphical representations of how supply
and demand interact to determine the equilibrium price and quantity. It also discusses how
price functions as a short-run rationing mechanism and a long-run guiding mechanism in the
market, by adjusting to clear shortages or surpluses and signaling changes to producers and
consumers.

The authors explain the difference between the short run and the long run and how
comparative statics analysis is used to analyze the impact of changes in the market on the
equilibrium points. This analytical technique is used throughout the text to study the pricing
mechanism in the market.