Managerial Economics- PDF

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MANAGERIALECONOMICS
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11.Fixed Cost and Marginal Cost.................................................................................................12. Measuring problems with straight line equation.....................................................................23. Price discrimination and profit analysis..................................................................................54. Cost and profitability analysis as per operations held in Manchester.....................................65. Multiple Choice Question.......................................................................................................86. Multiple Choice Question.......................................................................................................87. Multiple Choice Question.......................................................................................................98. Multiple Choice Question.......................................................................................................99. Multiple Choice Question.......................................................................................................910. Multiple Choice Questions....................................................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONManagerial economics deals with application of all economic concepts, tools, andmethods for solving practical problems (Hirschey, 2016). This helps in taking decision makingof manager and also acts as link between theory and practice. With the help of managerialeconomic the manager can take decisions regarding demand, production and price of any product(Froeb and et.al., 2015). This Project report states that about the demand and supply of boots thathad been manufactured by Toot Boot. All concepts regarding demand and supply had beenincluded in this project. This project report consists of calculation of fixed and marginal indifferent scenarios. The total cost and total average cost of boots had also been presented in thisproject through cost functions that had been provided. This project report also providesrelationship between marginal revenue and marginal costs. In this project there is analysisregarding if they offer delivery services in different states of United Kingdom.MAIN BODY1.Fixed Cost and Marginal CostFixed Cost is an expense that does not changes with change in production of units andeven can't be avoided even if there is no production (Rifkin, 2014). The examples of fixed costare Rent, salaries, utilities, property taxes, insurance etc.The Fixed cost of Toot Boot for the cost equation C(Q)=8000+100Q is 8000, as fixed cost doesnot change with change in production of units.Marginal Cost is the incremental costs that are incurred while producing additional goodsand services(Thirumalai, Sree and Gannu, 2017). Marginal Costs is calculated by taking changesin cost of production that had been divided by change in quantity of goods produced.Marginal cost= C(Q)-C(Q-1)8000-(8000-1)=1Average cost= C(Q)/Q= F/Q+ VC(Q)/Q=8000/35.63+ 100/35.63=227.34Average Variable cost= VC(Q)/Q100/35.63=2.811
Marginal costs can be denoted as the change in opportunity costs in business which arisesas if fluctuations in quantity produced which is increased by one unit. Value of produced unit hasbeen considered rather than its alternative unit for input purposes. The cost of additional inputhas been ascertained to determine expenses to be made for the next units.Thus, as perconsidering the above listed table on which it can be said that, the average costs of the data basehave been analysed here which is 227.34 out of fixed cost and variable cost analysis. Similarly,in relation with analysing the outcomes of average variable costs which had been determined as2.81.2. Measuring problems with straight line equationA. Profit maximizing price and quantity:Profit is maximised at the quantity where marginal revenue is equal to marginal cost.Marginal Revenue of any company represents change in total revenue that is associated with anadditional unit of output and same as with the marginal cost as it is also change in total cost foran additional unit of output (Shepherd, 2015).So, as both marginal revenue and marginal cost determines total revenue and total costsrespectively. So, Toot Boot can determine marginal revenue and marginal cost by setting themequal for maximization of total profits.The Demand Curve of Toot Boot is-:P = 1100 – 4QSo total Revenue will beTR=1100Q – 4Q2So total Cost Equation will beTC=8000 + 100QStep 1: Determination of Marginal Revenue by derivating total revenue with respect of quantityMR = dTR/dq=1100-2QStep 2:Analysing the marginal cost by derivating TC with quantity.MC= dTC/dq=100+4qStep 3: For solving Q, then MR=MC1100-2q= 100+4q2
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