Discussion questions and topic overview

Managerial Economics

Telecommunications has changed dramatically in recent years and continues to show signs of future change. The introduction of the smart phone has shifted technology away from communication via telephone. New applications allow users to use their phone as a walkie-talkie, way to access social-networks such as Facebook, a way to access email, skype and texting within applications. This changes the way customers approach buying a plan. There is less of a need for a large amount of minutes, but more of a need for unlimited, high speech internet. In addition, the customer base has grown as a wider range of people embrace the cell phone. Competition has increased. Now, some service providers do not require a contract and offer pay as you go services. In order to gain and keep customers, companies boast of faster connection speeds, cheaper services and better phones.

Retail merchandising has not seen recent changes in technology or customer base. However, although the customers have not changed, their spending habits might have as American is in a recession. Customers seek to spend less and therefore might move toward large discount stores rather than traditional retail stores.

Higher Education has experienced a change in technology somewhat recently. Now, customers are able to earn a degree online. The competition has increased as online colleges earn recognition. To compete, traditional colleges often offer online or hybrid courses as well. This allows for a larger customer base. Those who did not have time for school previously are now able to complete a degree from home in their own time.

Airlines have not seen a major change in technology, although has seen a change in minor details (i.e. DirectTV now available on some flights). The most recent change in competition came when the three major airlines announced their merger. The customer base has decreased as people choose to travel less and businesses cut down on extra expenses, such as traveling for conventions or sales, as video conferencing is more convenient than previously.

2. The main objective of the firm is to maximize profit. This is known as the profit maximization hypothesis (p. 29). This includes reducing costs and increasing revenue. The firm must make careful decisions in order to do this and these decisions might change over time. For instance, at some point, a firm might choose to outsource goods and services. That is, the firm might choose to hire another firm to provide goods or provide services that are important to the firms operation (for example, transportation of goods or payroll). At a later date, when market conditions change, the firm might decide to produce those goods and services on their own to minimize the cost of such goods and services.

A firm might have other goals as well. For instance, a firm might wish to maximize market share. This might result in a decrease in profit in the short run, but possibly maximize profit in the long run. This leads to complex decisions. It is up to management to make the optimal decision. That is, it is up to management to make the decision that most optimally brings the firm closer to established goals. In order to predict the optimal decision, a firm must understand the market. This leads us to the supply and demand model.