Tran Harry – The Economy Needs A Fix

The study of Managerial Economics is quite fascinating to me when I take time to sit down and think about it. It is a subject that has lots to do with Economics and while to many, the study of Economics is a dry subject, I believe that the addition of the Managerial aspect makes it fascinating.

Take for example a toilet paper company. Imagine what would happen if the world takes a more conservative approach to using toilet paper. That’s going to bring down the demand of your product. From there do you decide to raise prices on toilet paper to make more from each sale, even though overall volume has dropped by reduced consumption. By raising the price to try and earn more per sale, it might push people to become even more conservative with their usage, so they won’t have such a high toilet paper expense. Or do you decide to lower the price of your toilet paper, possibly targeting those who weren’t really into the whole conservation movement to begin with, and by lowering your price you may get them to be more wasteful again. But if volume doesn’t grow you essentially caused your revenue per sale to decrease with no additional volume gain.

This is a really basic example of how I just think the entire subject and study of Managerial Economics is really interesting. People at companies have planners who dedicate their careers to deciding what prices are best for their companies and the industries as a whole. If you ever wondered why some products are priced a certain way, a lot of it is owed to these studies.