THE DEMAND AND SUPPLY MODEL

Managerial economics utilizes tools from economic theory and econometrics to derive optimal solutions to managerial decision problems.
Read the background material and then write a 3 to 4 page report describing the diverse tools that managerial economics uses to derive optimal solutions, i.e., explain, using a variety of examples, the main tools of economic theory (the theory of markets, the role of prices, and the drive to profit maximization). Then express your views on the following questions:

• Are these concepts, tools and methodologies universal? That is, do they apply to any institutions? For example, do they apply to the military? Or to City Hall? If not, should they?

• Can a company that operates in the market afford to be inefficient (i.e., to waste resources)? For how long? What about the military? Or City Hall? That is, what are the forces and incentives that, in your opinion, are present in the market and absent in the military and in City Hall?