Financial and Economic Literacy for Managers

Running head: FINANCIAL AND ECONOMIC LITERACY FOR MANAGERS
Finance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
In Response to Question 1...............................................................................................................2
In Response to Question 2...............................................................................................................3
In Response to Question 3...............................................................................................................5
In Response to Question 4...............................................................................................................8
In Response to Question 5.............................................................................................................12
References......................................................................................................................................15
Appendix........................................................................................................................................18

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Introduction
Consumers have an ability in choosing and selecting the products and services from a
variety of range is defined as Consumer Sovereignty. Allocation of scarce resources and deciding
what is to be produced is ultimately selected by the consumers. Pricing of a product measures the
various concepts of economic activity in the market so it is necessary to understand the various
concepts and factors related to the market structure. Market forces such as demand and supply,
which affects the pricing of a product, were explained in the report in relation to the Tesco
Company. Profit and wealth maximisation is the key paramount of financial management and the
same were discussed in relation to firms objectives and approach in regard to the same.
Discussion
Consumer Sovereignty
In classical economic consumers, sovereignty plays an important role. Consumers have
an option for choosing between different suppliers and firms and the selection of the goods
would be in accordance with the supplier or firm, which offers quality product at cheapest price
(Tadajewski 2018). The theory explains that the customers will be using the discretion for
buying goods and services. The theory says that efficient firms will be rewarded for providing
goods that is required by consumers. The workings of the market economy is well described by
the famous economist Adam Smith who referred the concept as an invisible hand, which
involves consumers selecting products, and services from a range of products and services
(Feiwel 2016). Mostly those firms who produces goods and services, which are in high demand,
would do the profit maximisation by focusing on producing goods required by the consumers
(Smallbusiness.chron.com 2019).

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Business economics is applied in the decision making process where the same is applied
in the allocation of firms scare resource for achieving the goals of the firms. Mangers apply
various concepts and principal of business economics for solving various business related
problems and solutions. The concepts of business economics and decision made by the
management of the company is well supported by the application of economic analysis for the
business problems faced by the firms (Fellner and Spash 2015).
Basic Model Firm: Various activities and findings could be well studies with the help of the
economic model of the firm, which will be helping the firm in making economic decision about
the firm. Every company may face several hindrances in the form of operational issues and
management issues concerning various questions in the context of asset utilisation and increasing
the optimum utilisation of resources. The various questions concerned by the management of the
company may be in the form of whether raising the wages by 4-6% would be affecting the
profitability of the company. Investing in various capital investment projects and increasing
assets utilisation may form the basic questions, which may be solved with the help of the
economic model. The decisions made by the management of the company would definitely be
based upon the economic principles and concepts, which allows the management of the company
thinks about the profitability of the company.
There are various problems faced with firms and it is necessary that the firm knows about
the same in the context of policies and objectives of the companies. The profit maximisation
goals approach for the company should clearly indicate which profits the company sees to
maximize whether the same is the short term or the long-term profits of the company and the
implications of the same on the operations of the company (Wadman 2016).