Contents 1
1 The essence of business economics：an overview 1
The essence of business economics 1
Basic concepts in business economics 3
The competitive environment 12
Concluding remarks 17
2 The analysis of consumer demand 18
The essence of consumer demand 18
The market demand curve 20
Consumer surplus 22
The determinants of demand 23
The classification of products 25
Concepts of elasticity 28
The relationship between price elasticity and sales revenue 36
Concluding remarks 40
3 The analysis of production costs 42
The essence of production costs 42
The production function 43
Variable costs versus fixed costs 45
Production decisions in the short run and long run 46
Diminishing returns in production 47
Maximizing profit and the production decision 50
Economies and diseconomies of scale 53
The experience curve 60
Optimal scale and x-inefficiency 61
The firm’s supply curve 63
Elasticity of supply 66
Concluding remarks 67
4 The competitive environment 69
The essence of the competitive environment 69
Competitive strategy 70
Perfect competition 73
Monopoly 76
Monopolistic competition 83
Oligopoly 86
Competitive advantage 92
Concluding remarks 98
5 Managerial objectives and the firm 99
The essence of managerial objectives 99
Agency theory 104
Managerial theories 106
Behavioural theories 112
Concluding remarks 114
The essence of pricing strategies 116
6 Understanding pricing strategies 116
Price determination and managerial objectives 117
Generic pricing strategies 121
Pricing and the competitive environment 126
The marketing mix and the product life cycle 129
The economics of price discrimination 133
Pricing in multi－plant and multi－product firms 136
Peak-load pricing 139
Pricing policy and role role of government 140
Concluding remarks 143
The essence of investment appraisal 144
7 Investment appraisal 144
The investment selection process 145
Estimating cash flows 147
Evaluating and ranking investment Projects 149
Undertaking a cost－benefit analysis 154
Concluding remarks 156
8 Understanding the labour market 158
The essence of the labour market 158
The demand for labour 159
The supply of labour 163
Collective bargaining 167
Concluding remarks 169
9 Government and business 170
Introduction 170
The priciples of state intervention 172
Macroeconomic policy 174
Industrial policy 178
Competition law 182
Regional policy 185
Concluding remarks 188
10 Business and economic forecasting 190
The essence of business and economic forecasting 190
Collecting information on consumer behaviour 192
Statistical estimation of demand relationships 196
Forecasting demand 203
Concluding remarks 211
11 Business economics-a check list for managers 213
Check list for business success 214
Appendix：sources of business econmics data for managers 219
UK sources 220
International sources 223
References for further reading 223
Index 225