10/22/2023

Foreign Trade University

Ho Chi Minh City Campus

Principles of economic management

Lecturer: Phạm Thanh Dung
phamthanhdung.cs2@ftu.edu.vn
Room A107, Department of Business Administration & Finance - Accounting
Code to join class on MS Teams: 6enb6j1 (open until Oct 29th)

Michael R. Baye (2010), Managerial economics &

READING
MATERIALS: 1 business strategy, McGraw-Hill
Campell McConnell (2012), Economics: Principles,
2 Problems and Policies, McGraw-Hill Education
N. Gregory Mankiw (2008), Principles of economies,
3 7th edition, Cengage Learning
William B. Walstad (2009), Study guide use with
4 McConnell, Bruce & Flynn Macroeconomics,
McGraw-Hill Education
5 Robbins, S. P., & Coulter, M., MANAGEMENT 14E.
Datar, S.M., & Rajan, M.V. (2021). Horngren’s Cost
6 Accounting: A Managerial Emphasis, 17th Ed. Engl
and: Pearson Education.

ASSESSMENT
Evaluation criteria Grading Proportion
scale
Attendance The number of 10 10%
attendances and
participation in lectures’s
activities and quizzes
Mid-term (group work) Clear ideas and structure, 10 30%
logical analysis, rich
- In-class assignments references used and cited,
10%
- Report &presentation for clear language, creative 20%
given topic (due date Oct presentation
29th, submit on Dec 4th)
Final test show the understanding of 10 60%
problems learned in class
and self-study

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MODULE CONTENT

1 Overview of economics and economic

management

2 Economic management theories

3 Economic management functions

4 Principles of economic management

CHAPTER 1: Overview of economics and economic management

Overview of
Overview of
economics
economics
management

Definitions,
Definitions and role
characteristics, role

The relationship Content of economic

between economics, management
culture and politics science

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What is Economics?
q Economics was appeared more than two centuries ago and has gone
through many stages of development => many definitions of economics
have appeared
• “Economics is the study of how society manages its scarce resources. In
most societies, resources are allocated not by an all-powerful dictator
but through the combined actions of millions of households and firms.
Economists therefore study how people make decisions: how much they
work, what they buy, how much they save, and how they invest their
savings. Economists also study how people interact with one another.”
(Principles of Economics (5th edition), N. Gregory Mankiw, Cengage
Learning, 2012, page 4)

What is Economics?
• Nature of society’s resources is limited.
• Scarcity => cannot produce all the goods and
services.
• Economics studies how society uses scarce
resources to produce necessary goods and
distribute them to members of society.

Role of economics
The study of economics helps people understand the world around them. It
enables people to understand people, businesses, markets and
governments, and therefore better respond to the threats and opportunities
that emerge when things change.
Economists provide the tools by which analysts can study the costs,
benefits and effects of government policies in a range of areas that affect
society.
v Forming and maintaining society
v Meeting human needs
v Creating jobs
v Promoting industry diversification
v Improving quality of life

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Why does economic

development play an important
role in the economy of any
region?

Economic development
• Economic development is understood as the process of
progress in all aspects of an economy, changing both
quantitatively and qualitatively; closely combining the
process of perfecting both economic and social issues in
each country.
-> Economic development will support business maintenance
and expansion
• An increase in total income level;
• Trend-based changes in economic structure;
• The better and better transformation in social issues.

Sustainable conomic development

Evaluation criteria:
• Stable economic growth;
• Implement social improvement and justice;
• Reasonably exploit and economically use natural resources,
protect and improve quality of life.
“Sustainable development is a development process that has a
close, reasonable and harmonious combination of three aspects of
development, including economic growth, improvement of social
issues and environmental protection.” -World Summit on
Sustainable Development (Johannesbug, Republic of South Africa,
2002)

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Economic growth
- Economic growth is an increase in the
economy's income over a certain period of
time (usually a year).
- The increase is shown in scale and speed:
• Growth scale: Reflects the increase more
or less.
• Growth rate: Used in a relative
comparison sense and reflects rapid or
slow growth between periods.
- Economic income can be expressed in
kind or value.

Evaluating economic growth

• Gross Output (GO)
• Gross domestic product (GDP)
• Gross National Income (GNI)
• Per capita income

Gross Output (GO)

In economics, gross output (GO) is the measure of total economic
activity in the production of new goods and services in a country in an
accounting period. It is a much broader measure of the economy than
gross domestic product (GDP), which is limited mainly to final output
(finished goods and services).
It is equal to the value of net output or GDP (also known as gross value
added) plus intermediate consumption.
or: the total value of sales by producing enterprises (their turnover) in an
accounting period (e.g. a quarter or a year), before subtracting the value
of intermediate goods used up in production.

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Gross domestic product (GDP)

The value added created through the production of goods and
services in a country during a certain period

Gross National Income (GNI)

The Gross National Income,
GNI, formerly referred to as
gross national product
(GNP) measures the total
domestic and foreign value
added claimed by residents
at a given period in time,
usually a year, expressed in
international dollars using
purchasing power parity
rates.

Per capita income

(GDP per capita/GNI per capita)
Per capita income is a measure of the amount
of money earned per person in a nation or
geographic region
-> Economic growth takes into account
population changes.
The scale and growth rate of per capita income
are important reflecting indicators and are the
premise for improving the living standards of
the population in general.

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Orientation of economic
development
q Emphasize rapid growth
q Appreciate issues of equality and social justice
q Comprehensive development model

Vietnam has chosen the direction of comprehensive development.

The relationship between

economics, culture and politics
“The mode of production in material life determines the general
character of the social, political, and spiritual processes of life.” Concert BLACKPINK:
favorable correlation (Karl Marx, 1859)
• Economics is the content and measure of the rationality of
politics, while politics is the expression form of economics.
• Economic changes lead to changes in political ideology and
political regime
• Politics is relatively independent and has an impact on the
economy

The relationship between

economics, culture and politics
• Culture is defined by shared beliefs and preferences of respective groups. Culture of
a country is developed based on its history and supported by its economy.
• An economic system refers to the manner in which a culture produces and
distributes its goods and services. It refers to the conditions under which a cultural
group makes use of the capabilities of its individuals and the environment to derive
some benefits.
• Research suggest that economic decisions and economic reasoning may be heavily
influenced by cultural differences.
• Countries that exploit traditional or natural assets can generate wealth through
tourism, gastronomy, art and other things. The advantages of cultural heritage
include job creation, investment and sustainable alternatives to business models that
do little to help the environment.

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The relationship between

economics, culture and politics
• Economy is the key factor that determining the nature and appearance of
culture and politics. Economic development will create material
conditions and sources of living for political stability and cultural
development.
• Economy is the basis and condition for the formation and development of
culture and politics.
• Economic growth must go along with cultural development, political
stability, and solving social problems.
• The relationship between economics, culture and politics has mutual
influence on each other.

Concept of economics management

Definition

Objective

Characteristics

Management and economic management

Systematic approach: Process approach:

“Management is a goal- “Economic management is the
oriented activity that can process of directional influence
manage a system with of the management to organize,
the goal of transforming it command, coordinate, and
from one state to another, inspect activities in the
according to the principle reproduction process on a
of breaking down the old social scale or within each
system to create a new individual enterprise to achieve
system and control it." its goals.”

Subject <=> Object: by using methods

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Economic management nature - SUBJECT (CHỦ THỂ): tác động lên khách thể bằng các phương pháp,
Many different definitions have been given but most of them involve mục tiêu của hệ thống
the application of management theories, economic principles and
mathematical methods to business decision-making. As such it can - OBJECT (KHÁCH THỂ): all of the resources (human resource, land
be seen as a means to an end by the subjects on the objects, in resource…)
terms of finding the most efficient way of allocating their scarce
* MICRO: hoạt động quản trị kinh doanh
resources and reaching their objectives.
- Subject: những người đứng đầu ở các bộ phận công ty, CEO, CFO
• the subjects: organizations and individuals at upper-level - Object: tất cả các nguồn lực công ty có
management
• the objects: organizations and individuals at lower level * MACRO: hoạt động của chính phủ, nhà nước, đứng đầu, quản lý kinh tế
As an approach to decision-making, managerial economics is related - Subject: the Gov, people in the office of the Gov
to management theories, economic principles, decision sciences and - Object: tất cả các nguồn lực chịu tác động quản lý kinh tế
business functions.

Economic management nature

- The orientation are the resources and activities of the social
systems and organizations
- Be performed continuously over time
- About to achieve the system's goals and create added value
- Be carried out in constantly changing environmental conditions.
- Primarily include the process of planning, organizing, leading,
and controlling.

Social systems
• Gathering people or groups of people having social activities
with close relationships which influence, impact, and
compatibilise with each other.
• Levels of social systems: individual, family, organization,
community, industry, etc (smallest)
• The activities of social systems are the mobilization of
resources.
• To achieve the goal, the basic functions are to attract,
maintain and develop resources; achieve external and
internal goals set for the system.

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Social systems
Complexity (Tính phức tạp): The relationship b/w individuals in social
Oneness systems is complex

Oneness (Tính nhất quán): những khách thể có chung mục tiêu

Social
systems

Complexity purpose

Organizations
• A deliberate arrangement of people to accomplish
some specific purpose (that individuals
independently could not accomplish alone) in a
consistently stable structure.
• Human society is a society of organizations:
businesses, associations, units, state agencies, etc.

Organizations
clear
objective có tính mục tiêu, mục đích mạnh và rõ ràng hơn
provide
=> more STABLE STRUCTURE
many value to
people users
work for through
shared its
An organization is always managed
purpose Tổ goods/s >< Social systems might not be managed
ervice
chức
No matter what type the organization is, it always has to provide a specific
are
value, a good service to its customers
always open
manage system
d

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Characteristics of Economic Management

equivalent operates subjective two-sided

to both based on the activity of nature
science and authority of the
art the managers
managers

Economic Management is equivalent to both

Science and Art - SCIENCE NATURE: the methods / tools we use want making decisions.
When you run a business, you have to decide how much equipment?
-> cannot based on Subjective opinions only, but also on the OBJECTIVE
Science nature
DATA through careful research

- ART NATURE: based on the mindset, capability of each manager to

Art nature
decide to combine specific methods / tools -> SUBJECTIVE

Practical nature
=> HOẠT ĐỘNG QUẢN LÝ: SỰ KẾT HỢP CỦA KHOA HỌC + NGHỆ THUẬT

Economic Management is operated based

on the authority of the managers - Administrative Power: những Manager phải có chức vụ, quyền lực hành
chính.
Power of administrative organization
- Intellectual Power, Moral Power: Khi có thêm 2 yếu tố này -> dễ dàng có
Economic power impact lên các khách thể -> thực hiện theo đúng nhiệm vụ được giao.

Intellectual power - Economic Power: Làm tốt -> được thưởng -> có motivation -> quay lại
contribute to the organization -> dùng các nguồn lực sẵn có của cty phân
Moral power lại cho các cấp dưới -> lại tạo motivation

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Economic Management is subjective activity

of the managers
• Economic management decisions are formulated Các methods / tools mang tính Khách quan NHƯNG hoạt động quản lý
and issued by collectives and individual managers kinh tế mang tính Chủ quan của người quản lý
• Depends on the capacity of the management entity -> Hạn chế bởi tầm nhìn, năng lực của họ, thời gian họ sử dụng các
methods
=>Requirements for managers? => Hiệu quả mang lại khác nhau
(homework)

Economic Management has two-sided

nature
- Về mặt tổ chức - kỹ thuật: đáp ứng các yêu cầu của các công cụ,
Organizational - technical aspect: technique, tool, method, art of
phương pháp, nghệ thuật trong việc quản lý kinh tế một cách khoa học và
management hợp lý
Socio-economic aspect: the purpose of economic management
- Về mặt kinh tế - xã hội: phân bổ các nguồn lực khan hiếm, đáp ứng tất
activities is to serve human interests and needs
cả các nhu cầu của con người

Role of economic management

Mobilize and allocate resources
effectively -> cấp độ vi mô

Fix market failures (governments)

-> cấp độ vĩ mô

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Economic management Concerns

ØEfficiency
v “Doing things right”
– Getting the most
output for the least - Effectiveness (Hiệu quả): if things are risky or not; if we reach the goal or
inputs not
ØEffectiveness
v “Doing the right things” - Efficiency (Hiệu suất) saving timing, human resource aspect…
– Attaining -> the BEST OUTCOME but LEAST INPUT in SHORTER TIME
organizational goals

Effectiveness and Efficiency in Economic Management

Methods and Tools of Economic

Management

Definition Role

Feature Classification

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Overview of Economic Management

Methods & Tools
- Definition: mixture of chosen ways to intentionally
influence the objects of management to achieve
goals Which One is the Most Effective Methods of Economic Management?
- Role: Stimulate and motivate members to be
1. Promote campaigns to protect the school environment throughout the
dynamic and creative, exploit the potential of the
school, run and managed by Student Union and clubs
system, and discover external opportunities.
-> EDUCATIONAL METHOD

2. Prescribed in law and university rules, recorded in the student handbook.

-> ADMINISTRATIVE METHOD

3. Fine of 100,000 VND/violation, plus training points for students

complying with the regulations (training points is one of two conditions for
receiving student's scholarship).
-> ECONOMIC METHOD

1. EDUCATIONAL METHOD
- more effective in long-term, affecting the mindset of people to work
willingly for the sake of the whole system -> combine with other methods.
- require knowledge from employees to understand

Methods of Economic Management 2. ADMINISTRATIVE METHOD

- this is law, which means that it enforces people to follow even if it doesn’t
mention about the punishment.
- have the power of enforcement but limit the creativity of people
1. Administrative method
3. ECONOMIC METHOD
- more effective in short-term
2. Economic method
- the society becomes value-centric, people only work for value
- creates competitiveness b/w individuals -> they don’t work for the long-
term benefits of the company
3. Educational method - the reward increases over time
- if the reward is set too low, it creates NO motivation towards employees
- but if the reward is set higher & we don’t have enough financial strength to
pay, our company will have to be shut down

Tools of Economic Management

1 2 3 4

Planning Legislation Economic Material

tools tools policies tools

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Planning tools

Scheme
Plan
Project

- make plan for any decision of the company

Budget
- can be divided into long-term & short-term plan
Strategy

Economic policies

Tax

Price Interest

Economic policies

short term
Impact period
long term

Criteria Trade

Monetary policy
central, crucial
Impact field Finance most important
Investment

Employment

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Material tools

Natural Infra- National State Information

resources structure budget enterprises system

Macro (Gov)
-> affect the whole
economy

Conditions for effective use of the economic

management methods and tool system
Completion &
Synchronization

Operating change along the politic conditions

Capacity to use
environment

General requirements for applying

economic management methods and tools
- Conduct analysis of the current state of the economy,
evaluate the impact of selected methods and tools on
affected subjects, and reactions of affected subjects to them
- Determine the level of compatibility between management
goals and used tools -> select suitable tools for specific
goals
- Evaluate the characteristics of each tool in terms of
advantages and disadvantages and then make the appropriate
choice

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