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The intent of this book is to familiarize the reader with the key concepts, terminology, and principles from managerial economics. After reading the text, you should have a richer appreciation of your environment—your customers, your suppliers, your competitors, and your regulators. You will learn principles that should improve your intuition and your managerial decisions. You will also be able to communicate more effectively with your colleagues and with expert consultants.
As with much of microeconomic theory, many of the economic principles in this book were originally derived with the help of mathematics and abstract models based on logic and algebra. In this book, the focus is on the insights gained from these principles, not the derivation of the principles, so only a modest level of mathematics is employed here and an understanding of basic algebra will suffice. We will consider some key economic models of managerial decision making, but these will be presented either verbally, graphically, or with simple mathematical representations. For readers who are interested in a more rigorous treatment, the reference list at the conclusion of this text includes several books that will provide more detail. Alternatively, a web search using one of the terms from this book will generally yield several useful links for further exploration of a concept.
A note about economic models is that modelsA simplified representation of a real-world organization and its environment that leads to the understanding of complex and uncertain situations and appropriate action. are simplified representations of a real-world organization and its environment. Some aspects of the real-world setting are not addressed, and even those aspects that are addressed are simplifications of any actual setting being represented. The point of using models is not to match the actual setting in every detail, but to capture the essential aspects so determinations can be made quickly and with a modest cost. Models are effective when they help us understand the complex and uncertain environment and proceed to appropriate action.