This presentation is very useful to all students which are belong to the managerial economics and whose are doing b.com, BBA, MBA ect . It's a wonderful ppt for the students .

1. Introduction of
Managerial Economics

2. Table of contents
 Introduction Economics............................................................................
 Micro and Macro Economics
 Importance.................................................................................................
 Characteristics...........................................................................................
 Role.............................................................................................................
 Nature.........................................................................................................
 Function......................................................................................................
 Scope............................................................................................................
 Tools and Principal.....................................................................................
 Conclusion....................................................................................................

3. Economics
 It concern with the Production,
Distribution and
Consumption of goods and services.
Economics is the study of the
Allocation of our scarce resources
to satisfy our unlimited wants for
good and services.
 It also deals with capital formation in an
economy.

4. Defination...
According to MH Spencer managerial
economics is concern with the application of economic
principal and methodology to thedecision making process
within the firm ororganisation under the condition
ofuncertainty
Economics applies economic theory and
methods to solve business and administrative
problems through the proper use of economic
models in decision making.

5. Microeconomics
 Microeconomics is the study of decisions made by people and businesses regarding
the allocation of resources and prices of goods and services.
 It studies the behaviour of individual unit of an economy. In other words,
microeconomics tries to understand human’s choices and allocation of resources.
The key factors of microeconomics are as follows: •
Demand, supply, and equilibrium
 Production theory (laws)
Costs of production
 Price Determination Examples: Individual demand, and price of a product.

6. Macroeconomics
 Macroeconomics is the study of how the economy operates as a whole – more
than simply the sum of all markets. It studies the behaviour of aggregates of the
economy as a whole.It aims to determine income and employment level of the
economy.
 The important concepts covered under macroeconomics are as follows: •
1. Capitalist nation•
2. Employment determination
3. Trade Cycle
4. Investment expenditure
 Revenue Examples: Aggregate demand, and national income.

7. Managerial Economics
Managerial economics is a stream of management studies which
emphasises solving business problems and decision-making by
applying the theories and principles of microeconomics and
macroeconomics.
 It is a specialised stream dealing with the organisation’s internal
issues by using various economic theories.
Economics is an inevitable part of any business. All the business
assumptions, forecasting and investments are based on this one
single concept

8. 1. Better allocation of resources: Managerial economics not only offers the better allocation of
scarce resources among competing ends but also ensure the proper utilization of resources.
2. Right decision at the right time: It helps the executives working in the firm to understand the
various details of business and problems encountered and to take right decision at the right time by the
identification of key variables in decision-making process. Thus managerial economics attempt to
avoid the complexities of wrong decisions. Every manager has to take various relevant decisions
about the utilization of limited resources like land, capital, labour, funds etc. to get the
maximum returns, therefore, managerial economics, concentrates on practical aspects which
facilitates decision-making.
3. Identification of Problems: In todays scenario economy is becoming highly competitive and
dynamic, it helps in identifying various business and managerial problems, their causes and
consequence, and suggests various policies and programs to overcome them.
Importance of Managerial Economics

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4. Offers tools and techniques: Managerial economics ensures availability of the various
conceptual and technical skills, tools of analysis and techniques of judgment and other modern
tools and instruments like elasticity of demand and supply, cost and revenue, income and
expenditure, profit and volume of production etc to solve various dynamic problems of
business.
5. Attainment of business objectives: Managerial economics helps the business executives
to become more responsive, realistic and competent to overcome upcoming challenges in the
dynamic business scenario. This in turn facilitates achievement of various objectives like
profit and wealth maximization, society welfare, Customer satisfaction, attaining industry
leadership, market share expansion and social responsibilities etc.

10. 6. Facilitates decision making and forward planning: Managerial
Economics enables decision making and forward planning by the
evaluation of alternatives available to the managers.
7. Understanding the various external factors: It also helps in
understanding and analyzing the various external factors which affect
the decision-making of an organisation and ultimately affecting the
functioning and the success of the firm.
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11. Characteristics of Managerial Economics
 Managerial Economics is a practical subject rather than theoretical.
 Managerial Economics based on strong economic concept.
 Manager Economic is a both positive science and normative science.
 Positive economic describe how the economy behaves and product how it might
change an economic phenomena.
 It help to find the optimum solution to the business problem or problem solving
orientation.
 Managerial economic has a relationship with other subject like statistic,
mathematics ,operation research and marketing management.

12.  Business Planning and Forecasting: Managerial economics plays an efficient role in formulating
business policies by forecasting future demands and uncertainties. It assists in the effective decision
making of an organization by supplying all information using economic tools and techniques.
 Analyze Cost and Production level: Managerial economics focuses on minimizing the cost of
business. It determines the cost associated with different business processes and finds out the cost-
minimizing level of output. Managerial economics enables business managers in ensuring that there is no
resource wastage which reduces the overall cost.
 Formulate pricing policies: It helps in determining the right pricing policies for organizations.
Pricing method affects the profitability and revenue of the business organization and therefore fixing the
right price is essential. Managerial economics analyses the market pricing structure and strategies for
deciding the firm prices.
Role of Managerial Economics in Business

13.  Manages profit: Managerial economics monitor and control the profitability of the
business organization. Profit is the ultimate goal of every business and determines its
success or growth. It ensures that the desired profit is earned by making an estimate
of the revenue and expenses of an organization at different levels of outputs.
 Capital Management: Capital management is one of the important functions played
by managerial economics. It manages and analyses all capital expenditures of
business which involves huge expenditures. Before investing any amount anywhere it
measures the profitability of such a source for allocating funds.
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14. Nature of Managerial Economics

15.  Art and Science: Management theory requires a lot of critical and logical thinking and analytical skills
to make decisions or solve problems. Many economists also find it a source of research, saying it includes
applying different economic concepts, techniques and methods to solve business problems.
 Micro Economics: In managerial economics, managers typically deal with the problems relevant to a
single entity rather than the economy as a whole. It is therefore considered an integral part of
microeconomics.
 Uses Macro Economics: A corporation works in an external world, i.e. it serves the consumer, which
is an important part of the economy.For this purpose, it is important that managers evaluate the various
macroeconomic factors such as market dynamics, economic changes, government policies, etc., and their
effect on the company.
Nature of Managerial Economics

16. Multidisciplinary: It uses many tools and principles that belong to different disciplines,
such as accounting, finance, statistics, mathematics, production, operational research,
human resources, marketing, etc.Prescriptive/Normative
Discipline: By introducing corrective steps aims at achieving the objective and solves
specific issues or problems
Management Oriented: This serves as an instrument in managers’ hands to deal
effectively with business-related problems and uncertainties. This also allows setting
priorities, formulating policies, and making successful decision-making.
Pragmatic: The solution to day-to-day business challenges is realistic and rational
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17.  Demand Forecasting: Demand forecasting is one of the most important functions
of the managerial economist. In this function, the economist will analyze the market
conditions and predict the further demand for the products manufactured by his
undertaking.This will help the organization to produce accordingly to maximize the
profits and minimize the closing stock at the end of the year.
Capital Budgeting.The company has to invest money and assets in every business
before starting it. And the investment which is basically termed as the capital is very
important and has a long run.So they should be very careful in making this decision on
how much to invest in which thing. Here the managerial economist can help the
organization to make an effective investment.
Function of Managerial Economics

18.  Risk Analysis: Every business involves risk and the company has to bear it to run the business
operations. Here the management can take the help of the economist who can analyze the risk and help
the organization. If the risk is high then the company can change the plan and go through the planning
process once more.
 Pricing and Competitive Strategies: After the production of the products and services, the organization
has to set its selling price. And this price is a very important thing when we look at it from the profit
point of view.So they can take the help of the managerial economist to set the price for the product
which will help them to sell more units.He can even help the organization with the strategies which
they can use while setting the price of the product to beat the competition.
 Profit Planning: The main goal of every organization to run business operations is to make profits. But
what to do with the profit they earn by running the business operations?They can take the help of
managerial economists who can help them in terms of profit planning.
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19.  Government Regulations: The government policies are getting complex these days and
the organizations have to make sure that their business operations are not violating any
government regulations.
 Cost Analysis: He can help the organization to analyze the costs which are involved in
the production of the products and services. Basically, the production manager and the
cost engineer does this job. But here economists can help them by breaking down the
costs involved in the production process.
 Strategic Planning: No matter in which sector the organization is carrying out the
business operations there is a competition to face. And the beat the competition the
organization needs to plan good strategies. They can take the help of the economist to
do this.
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20. Scope of Managerial Economics

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 Demand Analysis and Forecasting
A firm relies on converting inputs into outputs and generates revenue from them. A clear and accurate
estimation of demand ensures a continuous efficiency of the firm. Several external factors like price, income,
affect the demand that need to be analyzed. The ability to forecast demands allows the management to
capitalize on the opportunities available and strengthen the market position of the firm.
 Cost and Production Analysis
Cost Analysis is yet another function of Managerial economics. A company makes a profit in two
ways: by increasing the demand or by reducing the cost. The determinants of assessing costs, the
connection between cost and yield, the gauge of cost and benefit are indispensable to a firm. Production
analysis is more of a physical exercise. It involves examining the factors of production, also known as
inputs, and obtaining the best combination so as to get the least cost combination

22.  Pricing Decisions, Policies, and Practices : Among the 4Ps of marketing, Price finds an important
place. For any firm, Pricing is a very important aspect of Managerial Economics as a firm's revenue
earnings largely depend on its pricing policy. Managerial economics helps the management to go through
all the analyses and then price a product. In an oligopoly market condition, the knowledge of pricing a
product is essential.
 Capital Management :Every asset a business owns is known as its capital. Capital management thus
becomes an important practice. Planning and control of capital expenditures is a basic executive function.
It involves the Equi-marginal principle. The prime objective is to ensure the sustainable use of capital.
This means that funds should be kept at a bay when the managerial returns are less than in other uses. The
main topics dealt with during capital management are Cost of Capital, Rate of Return, and Selection of
Projects.
 Profit Management :A business firm is an organization designed with an intention to make profits and
profits reflect the success of a company. After all the analyses, it all rolls down to profits
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23. Tools Used in Managerial Economics
1. Opportunity Cost Principle
The Opportunity Cost Principle is concerned with the cost of the next best alter Cosve of the good we are
buying or opting for. The idea behind opportunity cost is that the cost of one item is the lost opportunity to do
or consume something else. This principle has significant use in the process of decision making. Comparing
the opportunity cost of one decision with another one gives an idea about the ideal decision.
2. Incremental Principle
Managerial economists make use of the incremental principle in the theories of consumption, product pricing,
and distribution. The principle states that the firm can maximize its profit if it is able to equate its marginal cost
with the marginal revenue it generates. This helps managers decide on the expansion of their business, as it
guides them to keep expanding until they reach the desired point: when marginal costs stand equal to the
marginal revenue.

24. 3. Principle of Time Perspective
The principle of time perspective states that a decision should take into account both the short and long-
run effects on revenue and costs. It should maintain the right balance between the short-run and the long-
run perspectives. This principle helps managers in decision-making in output, prices, advertising, and
expansion of the business
4. Discounting Principle
The discounting principle states that if a decision taken today affects the cost and revenues of the future,
those costs and revenues must be discounted today to avoid any comparisons with alternatives.
This economic tool is used by managers in deciding on the prices of the product and also in investment
decisions.
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5. Equi-Marginal Principle
The Equi marginal principle states that consumers will choose a combination of goods to
maximize their total utility. The principle works on the basic idea of human nature. We
tend to compare the utility of two products and opt for those which are efficient. In a
similar fashion, managers in a firm would want to utilize all their resources to the same
extent.

26. Conclusion
Managerial economics plays a significant role in business
organizations. It is very much effective to the management in
decision making and forward planning in relation to the
internal operations of a business, as it gives clear understanding
of market conditions.It thus enables managers to optimize
business decisions involving them in the activity of forward
planning effectively and efficiently.

27. Thanks you....