Introduction
With
the emergence, of developments in global business and technological knowhow,
the management of various organizations has reported managerial problems in
their respective organizations. The complexities in the management have been
attributed to the emerging challenges arising because of invention and
innovations in the market. Market research and analysis have shown that poor
market performance has led to both microeconomic and macroeconomic
consequences. Single organizations and individuals experience microeconomic
effects while macroeconomic effects are realized at the national level where
they have significant influence on the economic performance. Managerial
economics applies the use of economic theories and concepts to eliminate market
irregularities. Managerial economics uses business and microeconomic concepts
to solve managerial problems. These managerial problems solved by managerial
economics include product selection, input approximation, and use of
technology, marketing mix and price determination. In the above cases,
managerial economics is used in designing the best approach for solving
managerial problems based on economic theories.
Increase in demand for
air transport in Asia
Over
a period, the countries of Asia have experienced an increase in the demand for
air transport. The increment in the demand can be attributed to the realization
of economic growth. This phenomenon can be cited as a managerial economics
aspect because the microeconomic planners in Asia engaged the application of
microeconomic theories to predict market forces. With the rise in economic
growth rate, the citizens in Asia will exhibit increased living standards.
Increase in living standards is associated with the occurrence of high
disposable income. This means that the citizens will experience changes in
their lifestyles. Hence, the increase in the demand for air transport in Asia
can be attributed to economic growth.
Managerial
economics is also detrimental in enhancing manufactures decisions to
manufacture more planes with china as the target market. China is densely
populated, and the citizens are continually gaining trust in air transport. The
reliability in air transport is extremely beneficial to the manufactures
because of the identification of the target market that promises high income.
With a population of 1.1billion, proprietors of business have identified China
as the best marketing in Asia because of its growing demand for Air transport.
Because of high population, greatest airline is internal in china. However, the
microeconomic planners have identified the role of expansion into the external
market that involves international flights. This investment is anticipated to
ensure an increase in the prices of the companies. With the increase in price,
the economy will have upward growth rate.
The plane makers
struggle to fulfill a rush of orders
With
the increase in technological development, various companies have opted to
adopt efficient machines. However, the effects of global recession experienced
in the previous years have also led to devastating effects on the macro
economies and micro economies. Because of this, the productivity of various
small scale and large-scale firms has been affected. In this regard, the
productivity of Boeing and Air has been significantly influenced. The
alterations and the instability of the global market have led to the reduction
in the productivity of the plane makers. In addition, the quest for technology
adoption has led to the increase in the demand for planes. Based on information
from the articles, the current plane production rate of 35 planes per month
does not meet the threshold. Because of the increasing global demand for
planes, the companies have opted to manufacture 40 planes per month.
Managerial
economics teachings state that managers must analyze the influence of the
market forces. Therefore, the companies have opted to increase monthly turnover
of plane manufacturing. The decision to increase the rate of manufacturing was
enhanced after the realization that some customers cancelled their bookings
because of the delay in manufacturing. The theories are also useful in the
determination of future market expectation. Because of the unforeseen circumstances
attributed to economic down turn; the companies have initiated a double booking
strategy as a security measure.
China creates
turbulence over EU trading levies
The
economic policies advocate for the existence of bilateral and multilateral trade.
In both cases, they represent trade between more than two countries. However,
recently the trade between china and the European Union has been compromised
because of the imposture of aviation levies. In a bid to reduce global warming,
the European Union trading block resolved to levy taxes on all the planes
flying in their territories and outside their territories. This move was meant
to reduce the amount of carbon dioxide emitted by 20% in 2013. However, this
decision was rejected the United States and china. This rejection has long-term
financial burden on the two countries because it increases their expenses by a
considerable margin. The articles show that the cost involved in this treaty
would amount to $3.6 in 2020. Despite the destabilization of foreign trade, the
implication of this treaty will result in an increment of the cost of air
transport that will be transferred to the consumers.
The principles of
managerial economics are helpful in the alienation of this strategy. Based on
the Chicago treaties, the European union is in constant violation of the treaty
that stipulated for unity in the aviation industries between different
countries. Furthermore, both china and the United States may decide to venture
into the European agreement for a period of 1 year in which they will not be
charged for their emission of carbon. Lastly, the international community’s may
initiate dialogue to help resolve the EU treaty that has compromised
international trade and competitive advantage.
US Air force contract
Following
the announcement of the contact, various companies applied for the contract but
the winning company came from Brazil. Embraer’s company has influenced the US
economy by supplying both commercial and executive airplanes. The bidding of
the contract was aimed at helping to negotiate for the differences between the
two nations. Considerations of the contract were because the company will work
in conjunction with US companies. In the bid for the contract, Embraer
stipulated that it will obtain supplies from more than 70 US companies and
offers jobs to more than 1200 US citizens. The acceptance of the bid was based
on the managerial economics concept. The realization that the contract had both
micro economic and macroeconomic influences informed the decision of awarding
the contract. Apart from the stability of the products, the building of the air
force planes resulted economic growth because of increased security, stability
and employment.
Conclusion
The
use of managerial economics is highly beneficial to organizations and
governments because it increases both financial and material gains. Managerial
economics is employed by managers and government officials to analyze risks,
pricing, production and budgeting. This principle uses microeconomic theories to
solve business problems and attain high returns from investments.
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