Introductory Economics for

Managers
M. Ryan Sanjaya
Outline
 Motivation
 Course outline
 Organization

 Fundamentals of managerial economics

Motivation
“Introductory Economics for Managers”
 Economics
 The science of making decisions in the presence of scarce
resources.
 Manager
 A person who directs resources to achieve a stated goal.
 Managerial Economics (Economics for Managers)
 The study of how to direct scarce resources in the way that
most efficiently achieves a managerial goal.
Motivation

ZDNet

indo.wsj.com

Harvard Business Review

Jakarta Post

Bloomberg
USA Today

Forbes
online.wsj.com

Liputan6.com
Course outline
Sesi Topik Referensi
1 Basic Concept of Economics and Managerial MB Ch. 1, SN Ch. 1-2, FM Ch. 1
Economics (1)
2 Basic Concept of Economics and Managerial MB Ch. 2, SN Ch. 1-2
Economics (2)
3 Quantitative Demand Analysis MB Ch. 3, FM Ch. 6
4 The Theory of Individual Behavior MB Ch. 4
-- student presentation --
5 Production and Cost Analysis MB Ch. 5, FM Ch. 7
6 Organization of the Firm MB Ch. 6, GLS Ch. 4
7 The Nature of Industry MB Ch. 7, GLS Ch. 3
-- student presentation --
Ujian tengah semester
Sesi Topik Referensi
8 Managing in Competitive, Monopolistic, and MB Ch. 8, FM Ch. 8-9
Monopolistically Competitive Markets
9 Basic Oligopoly Models MB Ch. 9, GLS Ch. 5
-- student presentation --
10 Pricing and Business Strategy MB Ch. 11, FM Ch. 12
11 Economics of Information MB Ch. 12, FM Ch. 17, 19, 20
12 Aspek Makro (1): peran pemerintah MB Ch. 14, NGM Ch. 6, 15
13 Aspek Makro (2): faktor internal/domestik NGM Ch. 10, 11, 16
-- student presentation --
14 Aspek Makro (3): faktor eksternal FM Ch. 11, NGM Ch. 18
Ujian akhir semester

PRE- Sebelum ujian tengah

semester
Setelah ujian tengah
semester
SEN- Kelompok 1-2: Topik 1-3
Kelompok 3-4: Topik 4-6
Kelompok 5-6: Topik 7-8
Kelompok 7-8: Topik 9-12
TASI. Kelompok dan nama anggota harap dikirimkan via email oleh
ketua Kelas sebelum kuliah minggu ke-2
Course outline

BUKU TEKS UTAMA

[MB] Baye, Michael R., Managerial Economics and Business Strategy, McGraw Hill,
2010.

BUKU TEKS PENDUKUNG

[SN] Samuelson, Paul A. & William D. Nordhaus, Economics, 19th Edition,
McGraw Hill, 2010.
[FM] Froeb, Luke M. & Brian T. McCann, Managerial Economics: A Problem Solving
Approach, Second Edition, South-Western, 2010.
[GLS] Grimm, Curtis M., Hun Lee, & Ken G. Smith, Strategy as Action
Competitive Dynamics and Competitive Advantage, Oxford University Press,
2006.
[NGM] Mankiw, N. Gregory, Principles of Macroeconomics, Sixth Edition, South-
Western, 2012.
Artikel jurnal dan bacaan populer lainnya.
Organization
 Penilaian

Jenis penilaian Bobot

Ujian tengah semester 30%
Ujian akhir semester 30%
Presentasi kelompok 20%
Tugas individu, kuis, dan kehadiran 20%
TOTAL 100%

 Minimal kehadiran 75% agar dapat mengikuti ujian

 Izin tidak masuk: harus tertulis dan dilaporkan ke bagian
akademik dan ke dosen
The Fundamentals
Effective management

Understand
incentives
Use
Understand
marginal
markets
analysis
Understand
profits
Identify Recognize
goals & time value
constraint of money
Understand Goals & Constraints

 Goals
 Large profits
 Good services
 Reduce risks
 Constraints
 Limited annual budget
 Availability of technology
 Number of workers
Understand Profits: Economic vs.
Accounting Profits

 Accounting Profits
 Total revenue (sales) minus dollar cost of producing goods
or services.
 Reported on the firm’s income statement.
 Economic Profits
 Total revenue minus total opportunity cost.
Opportunity Cost
 Accounting Costs
 The explicit costs of the resources needed to produce
produce goods or services.
 Reported on the firm’s income statement.
 Opportunity Cost
 The cost of the explicit and implicit resources that are
foregone when a decision is made.
 Economic Profits
 Total revenue minus total opportunity cost.
Opportunity Cost: Example
 Mahasiswa MM UGM
 Frekuensi kuliah per minggu: 4 pertemuan/minggu x 2,5
jam/pertemuan = 10 jam/minggu
 Frekuensi kuliah per semester: 14 minggu/semester x 10
jam/minggu = 140 jam/semester
 Frekuensi kuliah sampai selesai: 4 semester x 140
jam/semester = 560 jam

 Explicit cost: uang kuliah Rp100 juta

 Opportunity cost: apa saja yang bisa dilakukan dengan 560
jam kuliah?
 Bekerja: asumsi gaji Rp50.000/jam  Rp50.000 x 560 jam =
Rp28 juta
Opportunity Cost: Example
 Iklan Mastin
 Frekuensi: 20 kali per hari (@
30 detik)
 Tarif (per 30 detik pada prime
time): Rp12 juta

– Total explicit cost: Rp240 juta per hari

– Opportunity cost: apa saja yang bisa dibeli dengan
Rp240 juta per hari?
– 2400 banner iklan ukuran 3 meter
– Gaji 1 karyawan freshgraduate selama 6 tahun 8 bulan
– 4138 baris iklan di harian Kompas
Profits as a Signal
 Profits signal to resource holders where resources are
most highly valued by society.
 Resources will flow into industries that are most highly valued
by society.
Sustainable Industry Profits
Understand Incentives
 Incentive structure affect people’s performance
 Conflict of interest
 The manager: employee should work hard for the benefit of
the firm!
 The employee: I work hard not for the firm, but for my family
 Incentive compatible: the incentive fits with firm’s
goals
 Incentive plan: employee’s bonus is (positively) correlated with
firm’s profit
Understand Markets

Consumer- Consumer-
Producer Consumer
Rivalry Rivalry

Producer-
Government
Producer
& Market
Rivalry
Recognize Time Value of Money
 Present value analysis
 The money you have now is worth more than the same
amount you have next year
PV = FV/(1 + i)n
 What’s the present value of Rp1 billion in 10 years if interest
rate is 4%?
PV = Rp1 billion/1.0410 ≈ Rp675.7 million
 For a stream of income
PV = ∑FVt/(1 + i)t
Recognize Time Value of Money
 Present value analysis
 Present value
PV = FV/(1 + i)n
 Present value (stream of income)
PV = ∑FVt/(1 + i)t
 Net present value
NPV = ∑FVt/(1 + i)t – C0
Use Marginal (Incremental) Analysis
 Control Variable Examples:
 Output
 Price
 Product Quality
 Advertising
 R&D
 Basic Managerial Question: How much of the control
variable should be used to maximize net benefits?
Net Benefits
 Net Benefits = Total Benefits – Total Costs
 Profits = Revenue – Costs

 Quick review: calculus

Quick review: calculus

Y
Y = a + bX

b
Y = cX2 + dX + e
1

X
Quick review: calculus

Jika k adalah angka konstan Contoh:

- Turunan pertama
y = f (x) = k
y = 2x
¶y f’(x) = 2
f '(x) = =0
¶x
y = 2x2 – 3x + 4
Untuk fungsi 1 variabel
f’(x) = 4x – 3
y = f (x) = kx n
¶f - Turunan parsial
f '(x) = = knx n-1
¶x y = 2x1x2 – x1

¶y
= 2x2 -1
¶x1
¶y
= 2x1
¶x2
Marginal Benefit (MB)
 Change in total benefits arising from a change in the
control variable, Q:
B
MB 
Q
 Slope (calculus derivative) of the total benefit curve.
Marginal Cost (MC)
 Change in total costs arising from a change in the
control variable, Q:

C
MC 
Q
 Slope (calculus derivative) of the total cost curve
Marginal Principle
 To maximize net benefits, the managerial control
variable should be increased up to the point where
MB = MC.
 MB > MC means the last unit of the control variable
increased benefits more than it increased costs.
 MB < MC means the last unit of the control variable
increased costs more than it increased benefits.
The Geometry of Optimization: Total
Benefit and Cost
Total Benefits Costs
& Total Costs
Benefits
Slope =MB

B
Slope = MC
C

Q* Q
The Geometry of Optimization: Net Benefits

Net Benefits

Maximum net benefits

Slope = MNB

Q* Q