Economics For Managers - Hardcover

Farnham, Paul G.

3.41

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Hardcover

ISBN 10: 0130924253 ISBN 13: 9780130924254

Publisher: Prentice Hall, 2004

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This text combines Managerial Economics coverage with Macroeconomic theory to prepare business managers to make sound economic-based decisions that are most beneficial to the firm.
Every chapter begins with "A Case for Analysis" and ends with applied end-of-chapter questions and exercises outlining the practices dealt with every day in the modern business world.
The text wraps up with a final section on Integrating the Frameworks. This section encourages students to combine the macro and the micro analysis learned in the text, act as managers, and make profitable business decisions.

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From the Back Cover:

Economic factors influence the profitability of all firms and businesses. The success of a firm depends upon the ability of its managers to make solid decisions based on these economic factors.

This text combines Managerial Economics coverage with Macroeconomic theory to prepare business managers to make sound economic-based decisions that are most beneficial to the firm.

Every chapter begins with "A Case for Analysis" and ends with applied end-of-chapter questions and exercises outlining the practices dealt with every day in the modern business world.

The text wraps up With a final section on Integrating the Frameworks. This section encourages students to combine the macro and the micro analysis learned in the text, act as managers, and make profitable business decisions.

For further exploration, please visit www.prenhall.com/farnham

The goal of Economics for Managers is to present the fundamental ideas of microeconomics and macroeconomics and then integrate them from a managerial decision-making perspective in a framework that can be used in a single-semester course. Managers need to understand the insights of both microeconomics and macroeconomics because firms are influenced by forces in each of these areas. The approach in this text will help answer the first question many Master of Business Administration (MBA) and Executive MBA (EMBA) students ask when confronted with a required economics course in their programs: Why should managers study economics? Most of these students are not economists and do not want to become members of that profession. These students have often taken one or two introductory economics courses, which they typically found to be full of abstract models and theories that did not seem to relate to their jobs or their lives.

Economics professors may be responsible for some of these impressions because they often fail to recognize that business students are different from themselves. While economics professors may enjoy the logical, deductive approach to model building and hypothesis testing that characterizes their subject, business students typically want to know the relevance and applicability of basic economic concepts and how these concepts can be used to analyze and explain events in the business environment. Unfortunately, economics is often taught from an abstract theoretical perspective, so that current and future managers never learn how the subject can be used for decision making. Surveys at Georgia State University indicate that students are extremely dissatisfied when their MBA economics courses are taught from a traditional theoretical and mathematical perspective, but they respond favorably to courses that include numerous applications and illustrations combined with a basic level of theory.

Most micro/managerial economics and intermediate macroeconomics texts are written for economics students who will spend an entire semester using each text. The level of detail and style of writing in these texts is not appropriate for business students or for the time frame of a single-semester course. However, business students need more than a principles of economics treatment of these topics because they have often been exposed to that level of material already. Economics for Managers presents economic theory that goes beyond principles of economics, but is not as detailed or theoretical as a standard intermediate economics text, given the coverage of both micro- and macroeconomics and the additional applications and examples included in this text.

Intended Audience

This text is designed to teach economics for business decision making to students in MBA and EMBA programs. It includes fundamental microeconomic and macroeconomic topics which can be covered in a single quarter or semester or which can be combined with other readers and case studies for an academic year course. The book is purposely titled Economics for Managers and not Managerial Economics to emphasize that this is not another applied microeconomics text with heavy emphasis on linear programming, multiple regression analysis, and other quantitative tools. This text is written for business students, most of whom will not take another course in economics, but who will work in firms and industries that are influenced by the economic forces discussed in the text.

A course using this text would ideally require principles of microeconomics and macroeconomics as prerequisites. However, the text is structured so that it can be used without these prerequisites. Coverage of the material in this text in one semester does require a substantial degree of motivation and maturity on the part of the students. However, the style of writing and coverage of topics in Economics for Managers will facilitate this process and are intended to generate student interest in these issues that lasts well beyond the end of the course.

Economics for Managers can be used with other industry case study books, such as The Structure of American Industry by Walter Adams and James Brock. These books present extensive discussions of industry details from an economic perspective. Although they focus primarily on microeconomic and managerial topics, these texts can be used with Economics for Managers to integrate influences from the larger macroeconomic environment with the microeconomic analysis of different firms and industries.

Organization of the Text

The text is divided into three parts. Part I, Microeconomic Analysis, focuses on how individual consumers and businesses interact with each other in a market economy. Part II, Macroeconomic Analysis, looks at the aggregate behavior of different sectors of the economy to determine how changes in behavior in each of these sectors influence the overall level of economic activity. And finally, Part III, Integration of the Frameworks, draws linkages between Parts I and II.

Although many of the micro- and macroeconomic topics are treated similarly in other textbooks, this text emphasizes the connections between the frame-works, particularly in the first and last chapters. Changes in macroeconomic variables, such as interest rates, exchange rates, and the overall level of income, usually impact a firm through microeconomic variables, such as consumer income, the price of the inputs of production, and the sales revenue the firm receives. Managers must be able to analyze factors relating to both market competition and changes in the overall economic environment so they can develop the best competitive strategies for their firms.

To cover all this material in one text, much of the detail and some topics found in other micro and macro texts have been omitted, most of which are not directly relevant for MBA students. There is no calculus in this text, only basic algebra and graphs. Algebraic examples are kept to a minimum and used only after the basic concepts are presented intuitively with examples. Statistical and econometric techniques are covered, particularly for demand estimation, at a very basic level, while references are provided to the standard sources on these topics. The text places greater emphasis than other texts on how managers use nonstatistical strategies to make decisions about the demand for their products and draws linkages between the statistical and nonstatistical approaches.

Economics for Managers includes little formal analysis of input or resource markets, either from the viewpoint of standard marginal productivity theory or from the literature on the economics of organization, ownership and control, and human resource management. The latter are interesting topics that are covered in other texts with a focus quite different from this one. The macroeconomics portion of this text omits many of the details of alternative macro theories discussed elsewhere. Students are given the basic tools that will help them understand macroeconomics as presented in business sources, such as the Wall Street Journal, that emphasize how the national government and the Federal Reserve manage the economy to promote full employment, a stable price level, and economic growth.

Chapter-by-Chapter Breakdown

Chapter 1 presents the first news article case which illustrates both micro- and macroeconomic issues. This article helps establish the framework that will link Parts I and II of the text. The basic interaction between consumers and producers is then presented in Chapter 2 on demand and supply, which clearly illustrates the variables influencing both consumer and producer behavior.

Chapter 3 first discusses the various demand elasticities in conceptual terms and illustrates the relationships among price elasticity, changes in prices, and the impact on revenue. It then presents empirical estimates of different elasticities drawn from both economics and marketing studies and discusses how price and advertising elasticities influence a firm's competitive strategies. The standard economic consumer choice model is included as an appendix to Chapter 3.

Chapter 4 on understanding consumer demand and behavior includes a simple Excel example illustrating the use of regression analysis to estimate a consumer demand function. It then discusses an empirical study of automobile demand to show the additional complexities of real-world demand estimation. The chapter also includes a description of nonstatistical marketing approaches that managers employ to determine how consumer preferences and other economic variables influence the demand for their products. The two approaches are related by the fact that many statistical analyses are based on consumer and other market research data that managers currently use.

The following chapters focus on the issues of production and cost in the short run (Chapter 5) and long run (Chapter 6). These chapters emphasize the relationship between the underlying technology and the resulting costs of production. They also show how real-world production and cost functions may differ from the theoretical examples. The isoquant model is included in an appendix to Chapter 6.

The four basic market structure models—perfect competition, monopolistic competition, oligopoly, and monopoly—are presented in Chapters 7, 8, and 9. The discussion of the perfectly competitive model in Chapter 7 focuses on various agricultural products. However, the chapter illustrates how many of these industries are attempting to gain some degree of market power through product differentiation. This theme of the sources and uses of market power is carried through Chapter 8 on monopoly and monopolistic competition, which also includes a brief discussion of the effect of antitrust policy on competitive strategies. Chapter 9 presents insights on the interdependent strategic behavior of a few basic oligopoly models and then illustrates these p...

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