1 / 7

Economic Analysis for Strategic Thinking in Business Decisions

This course, taught by Bernard Malamud, focuses on applying economic analysis to enhance strategic thinking in business. Students will learn to anticipate the actions of customers, suppliers, competitors, and colleagues by building simplified models of complex situations. Key topics include maximizing profits while considering constraints, evaluating outcomes, and understanding the dynamics of demand and supply. The mantra of marginal benefits equating to marginal costs will guide the analysis, using real-world examples like GM's pricing strategy to illustrate concepts such as price elasticity and revenue maximization.

ramona-jacobs
Télécharger la présentation

Economic Analysis for Strategic Thinking in Business Decisions

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. MBA 710Applied Economic Analysis • Instructor: Bernard Malamud • Office: BEH 502 Phone (702) 895 –3294 Fax: 895 – 1354 • Email: malamud@ccmail.nevada.edu Website: www.unlv.edu/faculty/bmalamud Office hours: TR 11:30 – 12:30; 2:30 – 3:30 pm And by appointment

  2. Economics for Strategic Thinking You and your adversaries/partners • Your customers, suppliers, competitors, colleagues • Anticipate what they’ll do • Figure they’re as smart as you are

  3. Tools of economic analysis • Build simple, tractable models of complex situations … Capture the essence • Assume purposeful behavior • Maximize profit … subject to constraints • Anticipate outcomes … what happens when everyone does their best • Evaluate outcomes • Seek improvements The Mantra: Marginal Benefits = Marginal Costs

  4. Buyer Demand Price Income Tastes Other Prices Substitutes Complements Expectations Seller Supply Price Costs Input prices Wages, rents, ... Supplies Technology Expectations Demand and Supply

  5. GM’s Story • Gotta give rebates to old-truck owners = X • Coupon can be resold to others (for Q) • They get smaller rebate = x • There’s also a brokerage fee = k • Demand: 2.0 million trucks @ $20K • 0.6 million old-truck owners • 1.4 million other buyers Price elasticity of demand = 4

  6. GM’s Story, continued • Price elasticity of demand = 4 • For each 1% increase in price above $20K there’s a 4% decrease in quantity demanded below 2.0 million • If price rises by 1% to $20.2K, sales drop by 80,000 (4% of 2 million) to 1.92 million • This is highly elastic demand • ↑P Q↓↓ … Total Revenue = TR ↓ • ↓P Q↑↑ … Total Revenue = TR ↑

  7. GM’s Story, continued • Cost of truck to GM = $15K Marginal Cost = $15K … doesn’t change • GM wants to maximize profit Profit = Total Revenue – Total Cost It should produce to point where MARGINAL REVENUE = MARGINAL COST Note: If GM wants to sell another truck, it has to drop its price a bit on all those it’s already selling MR < Price

More Related