1. Welcome To Economics 515 The Price System and Resource Allocation
Instructor: Munir Mahmud
Office: LH 703
Phone: (714)
Office Hours:
Mon 5-7 p.m.
& By Appointments

2. All of you should have a personal account and you are required to send me an from that account within the first week of classes.
The Subject Heading of the should be just “Econ 515”.
In the Message Area you should mention your “Name” and “Student I.D”
My address is

3. Web Address:

4. Managerial Economics:
Definition:
It is the application of the tools of economic theory and decision sciences to see how a firm or organization can achieve its aims and objectives most efficiently.

5. Management Economic Theory Decision Sciences Managerial Economics
a. Microeconomics
b. Macroeconomics
a. Mathematical Economics
b. Econometrics
Managerial Economics
Optimal Solutions

6. Q = f ( P, Y, Pc , Ps )
Q = a + b1 P + b2 Y + b3 Pc + b4 Ps

7. Theory of the Firm Firm:
It is an organization or entity that combines and organizes resources for the purpose of producing goods and services for sale.
Proprietorship
Partnership
Corporation

8. Objective of the Firm: Value of the Firm: Profit Maximization
It is the present value of a the firm’s expected future net cash flows

9. Year One
Year Two
$100
$100
Interest Rate = 5 %
$100 today
$105 in a year

10. So one dollar a year from now has a present value of1 2 3 4 p1 p2 p3 p4

11. Project 1: $100, $20, $10
Project 2: $40, $50, $60
Discount rate = 2%

13. Value of the Firm

14. Distinction between Accounting & Economic Profit:
Total Profit = TR - TC
Accounting Profit = TR - Explicit Costs
Economic Profit = Accounting Profit - Implicit Costs
= TR - Explicit Costs - Implicit Costs