Constrained Maximization in Managerial Economics
SOLUTION:
Maximization is an economics theory, that refers to individuals or societies gaining the maximum amount out of the resources they have available to them.[KOTACK,2005]
Constrained Maximisation is a term in economics used to refer to and is concerned with the restrictions imposed on the availabilty of resources and other requirements.( ) it tries to explain using prescribed forumlae such as the langarian method how firms can solve issues to do with constrained maximisation. In this context however we are more interested in the maximisation of profits in firms, we are interested in the contraints imposed on managers that limit their options when making decisions.
For instance in profit making organnisations the primary objective is to make profits so it endeavours to explain what firms have to contend with in their objective. In this context profit maximization is the process by which a firm determines the price and output level that returns the greatest profit, and in doing so the company may have constraints on the bugdet, human resourse, inputs in terms of raw materials , capital expenditure etc.
Contrained Maximisation shows the relationship between inputs such as the ones mentioned and how they ultimatly affect the output. In solving any constrained maximisation problem the objective is to see how other variables can be manipulated to achieve the highest output, to do this Managerial economists use the constraint equation for one of the decision variables , then susbstitute for that variable in the objective function.
A typical example of constrained maximisation can be shown by examining a study done by M.T Maloney on a Bee Keeper Steve Cheung to analyse the problem of keeping bees as an integrated endeavour to explain contrained maximisation.
Be keepers sometimes paid and sometimes received pay depeneding on the marginal value of their pollination services relative to the value of honey they collected. For instance a farmer that uses bees to pollinate apple trees and to make honey from nector . the farmers outputs are apples and honey . Assuming there is a trade off between the two outputs i.e. the nector gathered from apple trees does not produce as much honey as that found elsewhere. When the farmer is interested in apple pollination he places the hives close to the apple trees.
From classroom to a cocktail party, having knowledge in today’s economics is definitely an asset when it comes surviving in the world of business. Cocktail Party Economics, by Eveline Adomait, and Richard Maranta undeniably satisfies as an economic training book, helping you understand the concepts of basic economics. The book brings to light many theories and thoughts, which are explained in a certain way that help readers easily, compare and relate them to each other. During the first couple chapters of the book, the main theories presented are scarcity, value, opportunity cost, production, and absolute/comparative advantage. Believe it or not, all of these theories are relatable to Supply and Demand; the two concepts introduced in chapters six and seven.
An answer to the puzzle will be found in solutions that are in equilibrium. An equilibrium in informed rational self-interest, or a Nash equilibrium, is any solution to the problem whereby neither party could do better by altering its position. However, this is a general and broad definition. Further stipu...
Objective function: J.P. Molasses' goal is to maximize the profit generated from the refining of raw sugar into molasses and its byproducts and then shipping those products to customers.
The Goal is a book that focuses on the theory of constraints in order to improve production. Eliyahu Goldratt brings us a pleasant story that shows the important strategies that any manager or CEO should follow to be successfully productive, and capable of reaching their goals. The book easily explains and demonstrates many attainable ways for any human being to learn how to manage their industrial relations, business processes, and also, their personal lives.
Initially, I didn’t care much about bees until after I received this assignment. Although I may be allergic to bees, they do help my everyday life. I don’t want food prices to go up because we can’t save some bees. We spend trillions on protection, when we have no war. How about take a few million to save the bees, and possibly save man.
...eir welfare as efficiently as they possibly can. According to Harberger (2008), “This process helps them to decide what they will supply and what they will demand,” essentially the ideology that birthed this statement translates into opportunity cost. Forgone opportunity, “or the best alternative sacrificed for a chosen alternative,” Tucker (2013), from the consumer or firms perspective, revolves solely around what they must sacrifice varying from factors of production to the establishment of mutually beneficial alliances with other consumers or firms, etc. Nevertheless, in conjunction with supply and demand, these two primordial concepts form a platonic relationship that generates countless influential possibilities with respect to the decisions made by consumers and or firms in order to truly generate what they perceive as the most efficient use of their resources.
All around the world honeybees are vanishing at an alarming rate, according to the documentary Vanishing of the Honeybees. This film features two commercial bee keepers and their fight to preserve their bee numbers. David Hackenburg was the first commercial bee keeper to go public the bee population was decreasing. Approximately two billions bees have vanished and nobody knows the reason why. Honeybees are used all across America to help pollinate monoculture crops like broccoli, watermelon, cherries, and other produce. Without the honeybees the price for fresh and local produce would be too much money. According, to this film commercial bee keeper’s help fifteen billion dollars of food get pollinated by commercial
Our livestock depend on bee-pollinated plants like grain. Poorly pollinated plants produce fewer fruits and seeds, leading to higher prices (New Agriculturist, n.d.). Some crops are entirely dependent on pollinators such as almonds and others are 90 percent dependent on blueberries and cherries (ABF, 2015). Bees give us honey and we use this honey in food, shampoo, and moisturizers (Mercola, 2015). Bees pollinate 70 out of our 100 major crops; that includes apples, cucumbers, pumpkins, and many more.
...responsibility of generating profit and maximizing it, but then it should take into account the principle elements that are very crucial to its survival - stakeholders. For instance, if customers stopped buying product or investor withdrew their investment because of a greedy pursuit of profit. The future of an entire business collapses. In addition to this, maximizing the profit by just binding to the rules of the game is not enough since the rules of the game are not always fair, thus primary and secondary stakeholders should be considered while making money.
...ng major objectives for firms and attaining ability of balanced conflicting and demands for firm stakeholders.
A complete firm maximizes profit or minimizes loss in the short run by producing that output at which price or marginal revenue equals marginal cost, provided price exceeds minimum average v...
“Marginal analysis involves changing the value(s) of the choice variable(s) by a small amount to see if the objective function can be further increased (in the case of maximization problems) or further decreased (in the case of minimization problems)” (Thomas & Maurice, 2012, pp. 91). Marginal analysis is known as “the central organizing principle of economic theory” for its importance and applicability to many aspects of our daily lives as well as our careers (Thomas & Maurice, 2012, pp. 94). The key concepts of marginal analysis include total benefit, total cost, marginal benefit, marginal cost and net benefit. These concepts all come together to play a significant role in the use of marginal analysis to reach the optimal desired outcome.
Pollinators are very important to the environment because many plant species rely on reproduction to be carried out by pollination1. Bees are dependent on plants for pollen and nectar and in return, are the most common pollinator of plant species and around 90 percent of plants require pollination by an animal7. Bees are used in farming, both for pollinating crops and for producing honey, and the estimated value of bees to the United Kingdom is £400 million per year9. Plants are the primary producers in many food webs and, as so many are dependent on pollination in order to reproduce, a decline in pollinators would have a detrimental effect to whole ecosystems. Therefore, the declining numbers of pollinators, particularly bees, are a cause of concern because of the environmental knock-on effects. High declines in adult bee numbers in some colonies have been reported and this decline is known as colony collapse disorder6. These declines are higher than normal and can go unnoticed by bee keepers because the bees do not generally die in the nest so the decrease is not immediately obvious. The problem addressed in this paper will be the decline of bees and the effects this decline has on the environment. The solutions proposed for this problem are increasing research, managing farming and spreading awareness. It is important to conserve the bee populations before the problem of decreasing pollinator numbers becomes too great to fix.
Therefore, to achieve this objective, managers have to make choices in decision-making, which is the process of selecting a course of action from two or more alternatives (Weihrich & Koontz; 1994, 199). A sound decision making requires extensive knowledge of economic theory and the tools of economic analysis, that are directly related in the process of decision-making. Since managerial economics is concerned with such economic theories and tools of analysis, it is very relevant to the managerial decision-making process.
Controlling: The Company must function in optimum levels toward the achievement of the desirable objectives, discarding lower value activities and concentrating on higher value activities to ensure the optimum results in the use of rare resources such as time, money, space, market shares.