Business economics

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  • 1. FEATURES OF BUSINESS ECONOMICS • BUSINESS ECONOMICS IS CONCERNED WITH DECISION – MAKING OF ECONOMIC NATURE. • BUSINESS ECONOMICS IS GOAL ORIENTED AND PRESCRIPTIVE. • BUSINESS ECONOMICS IS PRAGMATIC.IT IS CONCERNED WITH THOSE ANALYTHICAL TOOLS WHICH ARE USEFUL IN IMPROVING DECISION – MAKING.
  • 2. FEATURES OF BUSINESS ECONOMICS • BUSINESS ECONOMICS BRINGS FORTH SOLUTIONS OF PROBLEMS, PROVIDES NECESSARY CONCEPTUAL TOOLS AND HELPS THE DECISION MAKER BY PROVIDING MEASUREMENT OF VARIOUS ECONOMIC ENTITIES AND THEIR RELATIONSHIP.
  • 3. DEFINTIONS • “MANAGERIAL ECONOMICS IS CONCERNED WITH THE WAYS IN WHICH MANAGERS SHOULD MAKE DECISIONS IN ORDER TO MAXIMISE EFFECTIVENESS OR PERFORMANCE OF THE ORGANISATIONS THEY MANGE.”
  • 4. DEFINTIONS • ECONOMICS IS A FUNDAMENTAL ACADEMIC SUBJECT WHICH HELPS TO UNDERSTAND AND TO ANALYSE PROBLEMS OF BUSINESS DECISION MAKING.”
  • 5. BUSINESS ECONOMICS IS THE INTEGRATION OF ECONOMIC THEORY WITH BUSINESS PRACTICES FOR THE PURPOSE OF FACILITATING DECISION MAKING AND FORWARD PLANNING BY THE MANAGEMENT.”
  • 6. MANAGEMENT DECISION PROBLEMS CAN BE SOLVED BY THE APPLICATION OF ECONOMIC THEORY AND TOOLS OF DECISION SCIENCES.
  • 7. INTEGRATION OF ECONOMIC THEORY AND BUSSINESS PRACTICE • WITH THE HELP OF ECONOMIC THEORY WE CAN UNDERSTAND THE ACTUAL BEHAVIOR OF BUSINESS. • BUSSINESS ECONOMICS ATTEMPTS TO ESTIMATE AND PREDICT THE ECONOMIC QUANTITIES AND RELATIONSHIPS.
  • 8. INTEGRATION OF ECONOMIC THEORY AND BUSSINESS PRACTICE • DECISION MAKING AND FORWARD PLANNING IS DONE WITH THE HELP OF ESTIMATED ECONOMIC QUANTITIES AND RELATIONSHIPS. • THE MANAGERS CANOT IGNORE THE ENVIRONMENT WITHIN WHICH THEY OPRATE.
  • 9. NATURE OF BUSINESS ECONOMICS • BUSINES ECONOMICS IS MICRO ECONOMIC IN NATURE: THE UNIT OF STUDY IS A FIRM. • BUSINESS ECONOMICS CONCENTRATES ON MAKING ECONOMIC THEORY MORE APPLICATION ORIENTED • BUSINESS ECONOMICS IS MORE PRAGMATIC.
  • 10. • BUSINESS ECONOMCS TAKES THE HELP OF MACRO ECONOMCS ALSO SO AS TO UNDERSTAND THE EXTERNAL CONDITIONS WHICH ARE RELEVANT TO THE BUSINESS.
  • 11. IN NUTSHELL IT CAN BE CONCLUDED THAT BUSINESS ECONOMICS REFERS TO THE APPLICATION OF ECONOMIC THEORY AND THE TOOLS OF ANALYSIS OF DECISION SCIENCE TO FIND THE OPTIMAL SOLUTION TO BUSINESS DCISION PROBLEMS.
  • 12. ECONOMICS • BE ALL AND END ALL OF THE HUMAN EFFORTS IS CONSUMPTION. • THE WHOLE AND SOLE PURPOSE OF ECONOMY IS PRODUTION OF GOODS SERVICES FOR CONSUMPTION NOW IN FUTURE
  • 13. ECONOMICS • MACRO ECONOMICS IS THE STUDY OF THE BEHAVIOUR OF THE ECONOMY AS A WHOLE • IT CONTRASTS WITH MICRO ECO WHICH STUDIES: INDIVIDUAL PRICES, QUANTITIES, MARKETS
  • 14. BASIC ECONOMIC PROBLEM • “ECONOMICS IS A SCIENCE WHICH STUDIES HUMAN BEHAVIOUR AS A RELATIONSHIP BETWEEN ENDS AND HUMAN RESOURCES WHICH HAVE ALTERNATIVE USES” PROF ROBBINS • WANTS ARE UNLIMITED MEANS TO SATISFY WANTS ARE LIMITED BUT MEANS OR RESOURCES CAN BE PUT TO ALTERNATIVE USES.
  • 15. BASIC PROBLUMS OF AN ECONOMY • WHAT TO PRODUCE. • HOW TO PRODUCE. • FOR WHOM TO PRODUCE. • WHAT PROVISION BE MADE FOR ECONOMIC GROWTH.
  • 16. “HE WHO CAN NOT SEE BEYOND THE DAWN WILL HAVE MUCH GOOD WINE TO DRINK AT NOON, MUCH GREEN WINE TO CURE HIS HEADACHE AT DUSK AND ONLY RAIN WATER TO DRINK FOR THE REST OF THE DAYS”
  • 17. “ECONOMICS IS THE STUDY OF HOW MAN AND SOCIETY CHOOSE, WITH OR WITHOUT THE USE OF MONEY, TO EMPOY SCARCE PRODUCTIVE RESOURCES WHICH COULD HAVE ALTERNATIVE USES, TO PRODUCE VARIOUS COMMODITIES OVER TIME ,AND DISTRIBUTE THEM FOR CONSUMPTION NOW AND IN THE FUTURE AMONG VARIOUS PEOPLE AND GROUPS” PROF SAMUELSON
  • 18. MICRO ECONOMICS • STUDIES THE BEHAVIOUR OF INDIVIDUAL WHICH AND SMALL GRUPS – INDIVIDUAL CONSUMAR PRADUCER FIRM • HOW MUCH TO CONSUME • WHAT TO PRODUCE –PRODUCTION STRUCTURE
  • 19. MICRO ECONOMICS •HOW TO PRODUCE – LOCATION •WHERE TO SELL •AT WHAT PRICE
  • 20. • HOW THE MARCKET FUNCTIONS • WORKING OF A FREE MARCKET ECONOMY • ROLE OF PRICE MECHANISM IN ALLOCATIONS PRODUCTIVE RESOURCES-INVISIBLE HAND
  • 21. • HOW A COMPLETELY PLANNED ECONOMY WORKS • SOCIETY AND EFFICIENCEY ECONOMIC BENEFIT COMES FROM SELF INTRESTED ACTIONS OF INDIVIDUALS.
  • 22. BASIC ISSUES OF MICRO ECONOMICS STUDIES THE ECONOMIC ACTIONS AND BEHAVIOURS OF INDIVIDUAL UNITS SUCH AS • INDIVIDUAL CONSUMER. • INDIVIDUAL PRODUCER(FIRM). • THEROY OF PRODUCT PRICES. • STUDY OF DIFFERENT TYPE OF MARCKETS. • DISTRIBUTIONAL THEORIES. • ECONOMIC EFFICIENCEY.
  • 23. IMPORTANCE AND USES OF MICRO ECONOMICS • EXPLAINS HOW A FREE MARKET ECONOMY FUNCTIONS • HOW THE GOODS AND SERVICES PRODUCED ARE DISTRIBUTED AMONG VARIOUS PEOPLE FOR CONSUMPTION. • HOW FACTORS OF PRODUCTION ARE PAID • WHAT ARE THE GAINS FROM INTERNATIONAL TRADE?
  • 24. FREE MARKET ECONOMY OR CAPITALIST ECONOMY CHIEF FEATURES • RIGHT OF PRIVATE PROPERTY • FREEDOM OF ENTERPRISE • FREEDOM OF CHOICE BY CONSUMERS (CONSUMER SOVERIGNITY) • PROFIT MOTIVE • COMPETITION • ROLE OF PRICE MECHANISM • (IMPERSONAL FORCES SOLVE PROBLEM OF ECONOMY)
  • 25. • MARKETS STAND FOR THE FORCES OF DEMAND AND SUPPLY. • EACH INDIVIDUAL KNOWS WHERE HIS SELF INTREST LIES. • DECIDING WHAT TO PRODUCE. • DECIDING HOW TO PRODUCE. • DECIDING FOR WHOM TO PRODUCE. • DECIDING ABOUT RATE OF GROWTH. • SOLVING ALL PROBLEMS AT THE SAME TIME
  • 26. CONSUMER SOVEREIGNITY • IN A FREE MARKET ECONOMY CONSUMER IS SOVERPIGN. • CONSUMER PLACES THE ORDER, DECIDES WHAT SHOULD BE PRODUCED. • CONSUMERS AUTHORITY ARISES FROM HIS INCOME HIS ABLITTY TO PAY IS LIMITED. • HIGH PRESSURE SALESMANSHIP PUTS A CHECK ON CONSUMAR SOVEREIGNITY –RADIO, TELEVISION, NEWS PAPERS, HOARDING AT RAILWAY STATION AIRPORT, COLONIES, MARKET PLACE –ALL THESE BOMBORD CONSUMERS • CONSUMERS SOVEREIGNITY IS INDEED A MYTH
  • 27. PROBLEMS OF FREE MARKT ECONOMY • DOES NOT ENSURE MAXIMUM SOCIAL SATISFACTION. • PRINCIPLE OF CONSUMER SOVERIGNEITY NOT VALID. • ECONOMIC INSTABLITY AND UNEMPLOYEMENT. • DOES NOT ENSURE HIGH RATE OF ECO. GROWTH. • DECLINE OF COMPETITION AND ITS ADUERSE EFFECTS. • CONCENTRATION OF WEALTH AND INCOME
  • 28. ROLE OF COUNTERVAILING POWER IN CORRECTING THE WEAKNESSES OF FREE MARKET ECONOMY • TO DAY POWERFUL CORPORATE SELLERS OFTEN FACE EQUALLY POWERFUL CORPORATE BUYERS. THE GIANT STEEL MILL TO THE GIANT AUTO FIRM, THE GIANT PRODUCERS TO THE GIANT SUPERMARKET CHAIN. LARGE FIRMS NO LONGER BARGAINS WITH THE INDIVIDUAL EMPLOYEES, BUT WITH LARGE AND POWERFULL UNIONS.
  • 29. ISSUES IN MCRO ECONOMICS • WHY A COUNTRY IS POOR OR RICH. HOW A COUNTRY CAN BECOME RICH? • ROAD TO ECONOMIC PROGRESS AND HIGH RATE OF GROWTH. • WAHT IS INFLATION; WHY IT TAKES PLACE. • HOW CAN WE ACHIVE FULL EMPLOYEMENT • SOCIAL RESPONSIBILITY OF BUSINESS
  • 30. HOW ARE BASIC PROBLEMS SOLVED PRICE MECHANISM VS PLANNING
  • 31. MACROECONOMIC AGGREGATES • AGGREGATION INVOLVES ADDING APPLES TWO ORANGES SOLUTION • GROSS DOMESTIC PRODUCT (GIDP)- A MEASURE OF ECONOMIC ACTIVITY. • AGGREGATE CONSUMPTION- VOLUME OF GOODS AND SERVICES DEVOTED TO CURRENT- CONSUMPTION DURING A PERIOD. AGGREGATE INVESTMENT-VOLUME OF GOODS AND SERVICES DEVOTED TO CAPITAL FORMATION DURING A PERIOD • WHOLE SALE PRICE INDEX. • CONSUMER PRICE INDEX. • TOTAL MONEY SUPPLY, BANK CREDIT, FOREIGN EXCHANGE RESERVS ETC.
  • 32. GOVERNMENT IN MACRO ECONOMY CLASSICAL VIEW • LEAVE THE ECONOMY TO MARKETS. • ECONOMY IS ALWAYS IN FULL EMPLOYEMENT. • SUPPLY CREATES ITS OWN DEMAND • OVER PRODUCTION&UNEMPLOYEMENT ARE SHORT RUN PHENOMENON • PRICE &WAGE FLEXIBLITY BRING ABOUT FULL EMPLOYMENT. • NO GOVT. INTERFERECE OR LEAST INTERFERECE
  • 33. KEY NESIAN VIEW • 1.INVESTMENT IS HIGHLY VOLATILE. • 2.GOVT TO ACTIVELY PARTCIPATE IN ECONOMIC LIFE TO CORRECT THE FLUCTUATIONS IN INVESTMENT, CONSUMPHION, SAVINGS, OUTPUT, EMPLOYMENT,INCOMES,HROUGH PRO- ACHIVE MOUETRY AND FISCAL POLICY.