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DEPARTMENT OF POSTGRADUATE STUDIES
MANAGERIAL ECONOMICS
Assignment Question 1
With reference to Constrained Maximization :
a) What is the Meaning ?
b) How Important is to Managerial Economics?
c) How can it be solved?
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 ultimat ...