Economics

Scarcity and opportunity cost are the economic decisions that are very crucial in any entity. Scarcity is defined as a situation when people inside the economy would demand or need more than what is available in the environment or economy as a whole. Economics always assume that people will always have unlimited wants. However, resources are not enough to respond to what people demands. Scarcity, in essence, is the reason for being of economics. Economics studies how these resources will be distributed so that people can be satisfied. Underlying the concept of scarcity, is opportunity cost. People may have unlimited demands, but they give up something in the expense of another good. This is the essence of opportunity cost. These two concepts are important in managerial decision. It is assumed the people will continue to strive for something in their lifetime, but since resources are not available for all, they will have to sacrifice something in settle for another thing. The crucial decision lies on how to acquire these needs given the limited resources and what to give up, in case the resource is not available and what are the consequences of not getting such resource.

Should the company makes its own spare part or buy them from an outside vendor  This is how do we produce question.

Should the company continue to service the equipment that it sells or ask customers to use independent repair companies  This is a what do we produce question.

Should a company expand its business to international markets or concentrate on the domestic market  This is a for whom do we produce question.

Should the company replace its own communications network with a virtual private network that is owned and operated by another company  This a how do we produce question.

Should the company buy or release the fleet of trucks that it uses to transport its products to market.  This is a how do we produce question.

Running a successful business does not only rely on the external condition of the business environment, but also on how this business is managed from within. Recently, economics have been tied-up strategically with management as so respond to the different challenges that most organizations face. Managerial skills encompass the different aspects of production, marketing, finance and human resource in a business. A manager should be adept in decision making related on various business concerns as these involve resources and demands sustainability on the part of the business. A combination of technical skills and people-relationship abilities should be possessed by the manager in order to make sound business decisions and drive the company to success. However, according to Peter Drucker (1993), having business knowledge is not enough. In the world where things get competitive, a manager should also possess the qualities of an entrepreneur. An entrepreneur is a person who thinks strategically and always put innovations and change in mind. A business organization must continue to explore new products and technologies in order to keep their organization at par with competition. The business must be ready to face the different challenges in the economy, and as an entrepreneur, he must be able to take risks and respond uncertainty with strategic decisions. With managerial skills coupled with entrepreneurial mindset, the business sustains itself to deliver necessary goods and services which are of importance to the economy.

Managerial economics is a merger of the economic theories and the science of managing organizations (Maurice and Thomas, 2007). In a business firm, it is not sufficient that a manager has only the expertise on handling people and technical knowledge in the business. Economics, as an influential factor on the business environment has to be considered. Managerial economics branched from the theoretical groundings of microeconomics and was designed to be more effective when it was matched with management science. A firm operates based on the condition of the economy. It takes part in the whole business model thus in order to manage it well, managerial skills has also been incorporated ensure the success of the business. Managerial economics can be linked to the discipline of management and industrial economics.

Allocation of scarce resources remains to be a major challenge to most business organizations. These organizations employ different resources, from human to product inputs in order to deliver services to the consumers. Economics assumes that these resources are only limited, thus, efficient managerial decisions have to be made to sustain the business and its operations. For a manager, he can use two major decision making methods on dealing with the allocation of resources. First, strategic planning serves a blueprint of the business organizations goals and plans and how much resources will be used to attain these goals. In this way, an organization an foresee how much resources are available and needed and that the capacities of the existing resources are fully utilized. The second management decision is resource leveling. Like strategic planning, the manager has to make sure that the demands of the goals are balanced as to what resources that the organization has. These resources therefore should be used efficiently in order to produce maximum output.

Most of the business companies have evolved through economic changes. These economic changes have placed emphasis on how businesses were run in the economy. Thus, there is a four stage model of economic changes which most businesses, even the established ones, often undergo. In the first stage, most companies enjoy high profits out of their services. Especially those who are offering new services, these companies high profit margins in order to cover up investment costs. The next stage tells us that companies experience cost restructuring in their lifespan. Because of economic changes, these businesses adapt through reducing or downsizing the firm to cope up. Third phase is the structuring of prices of the goods. Due to the previous stage, businesses cope by changing the prices of their services in order to maintain sustainability. Lastly, as their progress being market leaders, they proceed in the stage where they have steady revenues can continue to expand their economic base.

On the country level, the perspective on what, how and for whom takes on a macroeconomic standpoint. A country usually produces goods and services that can be beneficial to the population and other clients internationally. These are embodied on the forms of export, where it could be a product or a human resource. The economy facilitates on how these outputs will be acquired, usually by other economies in another country. For example, professionals in one certain country get to work abroad, whatever they would earn would be accounted on the gross national product of their home country. Business-wise, it works in the same way. Businesses provide products and services that are consumed by the market. These are made through labor and capital, directed to the consumers, and these consumers pay the company for the product that they have received.