Chapter 4 provides a basic model of individual behavior
that enables the manager to understand the impact of various managerial decisions
on the actions of consumers and workers. Effective managers will use the theory
of consumer behavior to both direct employee behavior and to choose proper pricing
and ordering strategies. The underlying assumptions of consumer theory help
the student to have a more complete grasp of demand theory. This ultimately
leads to decisions, which improve the profitability of the manager's firm. My preference when teaching managerial economics is to
cover, thoroughly, indifference curve analysis. I have found that a complete
understanding of consumer choice not only helps students become better managers,
but it also improves their comprehension of producer theory when we cover isoquants
and isocosts. It also helps students better understand the isoprofit curves
used in oligopoly models. However, if you choose not to cover this material
it will not affect your students' ability to learn from the rest of the book.
After chapter 4, we limit our use of indifference curve analysis to appendices. |
2002 McGraw-Hill Higher Education