Saturday, January 26, 2013

Managerial Economics




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.