Managerial economics is a vital tool in any forward-looking organization. With such, the various principles of economics are incorporated in the overall running of the organization to facilitate its management. The application of various economic concepts in the management is thus essential to the realization of the organizational goals and objectives.The adoption of a sound business strategy is also attributed to efficiency in the application of these concepts too.

pts of managerial economics with high emphases on its fundamental principles. The discussion willy concepts of managerial economics as we have discussed in class. Further on, the paper will examine the underlying strategies that are essential in the pricing of the firm’s products and commodities.The discussion, in this case, will be inclined on a business entity that has rigorous market power as compared to other companies in the sector. The paper will further include a discussion of two news articles that have expounded the two concepts above. The paper wils. TheThe essay will also include my understanding of the articles and their relationships with the knowledge I have gained in class.

Fundamentals of Managerial Economics

Managerial economics is a multifactorial aspect hence the need for thorough understanding of its underlying principles and concepts. As such, the fundamental concepts and terms need to be evaluated so as to uphold rationality in decision-making in an organization. The understanding of these concepts will be vital in the formulation of a sound business strategy and efficient business model. The end product of these endeavors is improved performance and consequently huge returns. The topic is instrumental in evaluating the effects of the various organizational concepts and their influence on the economic decisions made in the firm. The chaptvent of the direct scarcity of resources (Baye and Prince 3). Effective management is determined by the anticipated objectives of the organization. Therefore, the identification of the underlying goals and setbacks of an organization as well as its profit are vital in realizing effective management. Other fundamental requirements for the same include the time value of money, market considerations and the incentives available (Baye and Prince 4). The profits anticipate profits margins are also influenced by the five forces of the power of buyers and suppliers, industrial rivalry and the product characteristics of substitution and complementary (Baye and Prince 8)and optimal managerial decisions are center-staged on the concepts of marginal concepts and marginal costs. As such, the ratio of benefits to cost has to be higher to realize higher returns (19). Additionally, the by calculating the present value of the investment project or plan before the actual implementation is essential in making a concrete decision on which project to undertake (Baye and Prince 14).

Thearticle on the Forbes about the trends of Burger King in the fast food industry depictsthekey concepts of managerial economics. There is a positive correlation between the article and what we have covered in class. For instance, the ability of the company to understand the market and the underlying competitive practices in the industry hasimproved its market capacity by engaging in franchises and opening chains (Team).The understanding of the five forces such as substitution and complementary productions has enabled the company to increase its menu mix thereby attracting more sales (Team).

Pricing Strategies for Firms with Market Power

The adoption of sound pricing strategies is an ideal requirement for profit optimization. The chapter tries to evaluate the various concepts that relate to the product prices by an outspoken firm. Theprice that maximizes profit is a function of marginal cost (Baye and Prince 412). Therefore, the price is instrumental in the monopolistic competitionscenario. Higher profits may also be realized by initiating price discrimination mechanisms with varying degrees. For instance, theproduction of output by an organization with market power should be initiated when the marginal revenue and marginal cost for the same group are equal in value (Baye and Prince 421)Price discrimination entails the sale of a commodity in at different in different market set ups. The addition of a fixed fee on a commodity in the case of two-part pricing is significant in the realization of higher profits for such organizations (423). The use of block pricing and commodity bundling strategies is also essential for realizing the anticipated profit margins by business entities with market power.The increased levels of loyalty to a specific brand from such an organization arerand competition hence huge profit margins (Baye and Prince 435). Additionally, the use of randomized prices, transfer pricing and price matching will help the firm to realize enormous prhence his ability to purchase it at whichever cost (436). The news article on The NEWDAILY is substantial in showing the pricing strategies that various organizations adopt and their impacts. The article, “How Bunnings’ prices are designed to nail customers” shows how the company initiates the price discrimination policy on its hardware products. The article ascertains that price beating ensures price discrimination between those who bother about the price or not(Murphy). The article links up well with my class work. For instance, I haadvertised prices of the product are essential for the price matching techniques though the impacts could be lethal(Murphy).

Conclusion

Effective management is a subset of managerial economics. The understanding of the prevailing market, the price value of money and other economic concepts are vital tools for efficiency in managerial decisions. The Burger King company evaluated the existing competition in the fast food industry thereby adopting sound strategic plans to increase its sales and match the competitors. Production of burger complements and menu mix led to increased sales and returns to the company. An organization with enormous market power is obliged to adopt various pricing strategies to increase its profitability. The adoption of random prices, price matching, transfer pricing and price discrimination are instrumental in realizing higher profits. The use of price discrimination and irregular pricing of products by Bunnings’ coincides perfectly with my classwork knowledge.

Works Cited

Murphy, Jason. “How Bunnings’ Prices Are Designed to Nail Customers.” The New Daily.N.p., 31 May 2015. Web. 31 May 2015. (http://thenewdaily.com.au/news/2015/05/31/bunnings-prices-designed-nail-customers/)

Team, Trefis.”Key Trends Impacting Burger King’s Business.”Forbes. N.p., 7 Jan. 2014. Web. 31 May 2015. (http://www.forbes.com/sites/greatspeculations/2014/07/01/key-trends-impacting-burger-kings-business/)

Baye, Michael R., and Prince Jeffrey T. Managerial Economics and Business Strategy. New York: McGraw-Hill/Irwin, 2014. Print.