3. SCOPE OF MANAGERIAL ECONOMICS
• 1)Building Analytical Models to focus on core
issue.
• 2)enhance the analytical capabilities of
business analyst.
• 3)clarifies various concepts to assist managers
to conceptual pitfalls.
4. NESESSITY OF MANAGERIAL
ECONOMICS
• 1)uncertainty & risks in market.
• 2)uncertain behaviour of market forces
• 3)demand supply mismatch
• 4)improve business environment
• 5)dynamic Government policy.
• 6)social & political changes.
• 7)complexity of modern business world &
decision making.
5. BUSINESS DECISION &
ECONOMIC ANALYSIS
SELECT THE BEST OUT OF ALL AVAILABABLE
OPPORTUNITIES IN 4 PHASES
1)Determine & define the objective.
2)Market survey from all angles.
3)invent, develop and analyse possible course
of action.
4) Select the SPECIFIC course of action.
6. Importance of Managerial economics
• Determining the goal & survey are very
important. They test the analytical ability,
appropriateness & validity of decision in
complex business world.
• Personal business sense & intelligence,
intuition, experience have to get value
addition by quantitative analysis of market
environment on the basis of economic
theories & tools.
7. PROBLEMS OF CHOICE
• 1) always there is functional relationship
among several economic variables.
• 2) threat of alternatives.
• 3)scarcity of resources.
9. OPERATIONAL ISSUES
• Here MICROECONOMICS is applied.
• 1) what to produce
• 2)how much to produce ( size)
• 3)technology
• 4)price & price competition
• 5)business promotion
• 6)investment decisions
• 7)managing profit & capital
• 8)management of inventory
10. ENVIRONMENTAL ISSUES (BUSINESS
CLIMATE)
• 1) type of economic system of the country.
• 2) business behaviour of people
• 3)structure & function of financial institutions
• 4)magnitude & trends of foreign trade…import &
export.
• 5)trends in labour & capital markets
• 6)economic policies of government
• 7)social factors
• 8) trade unions, cooperatives, SHG
• 9)social structure
14. DEMAND
• Effective Demand is the amount buyers are
willing to purchase at a given price over a
given time.
• DEMAND= desire+ability to pay+willingness to
spend.
• Demand always has REFERENCE POINT reg
price & time.
16. DEMAND FUNCTION
• A mathematical expression of the
RELATIONSHIP between quantity demanded
of the commodity and determinants is known
as the DEMAND FUNCTION
17. Factors affecting Demand Function
• Price
• Ps, Pc
• Taste
• Advertisement
• NB: demographic factors
18. DEMAND SCHEDULE
• TABULAR STATEMENT OF PRICE/QUANTITY.
Usually inverse functional relationship
between price and quantity.
• TYPES: INDIVIDUAL, MARKET
21. FEATURES OF DEMAND CURVE
• 1.usually negative slope
• 2) a particular point represents price quantity
relationship.
• 3) curve as a whole represents demand
behaviour wrt alternative price variation.
• 4) can be linear or non linear.
22. LAW OF DEMAND
• Demand is mostly inversely proportional to
price.
• There can be extention & contraction.
24. ASSUMPTIONS IN LAW OF DEMAND
• 1. nil change in income
• 2.nil change in preference
• 3.nil change in fashion
• 4.nil change in substitute& supportive goods
• 5.fixed future
• 6. nil change in demographics
• 7.ignores innovation
• 8.nil change in wealth distribution
• 9.nil change in tax policy
• 10.nil change in weather condition
25. DETERMINANTS OF DEMAND
• 1) price of commodity
• 2)income of buyers
• 3)taste, habit, preference
• 4)relative prices of substitute &
complementary goods
• 5) expectation of consumers
• 6)advertisement
26. DEMAND DISTINCTIONS
• 1) producer goods vs consumer goods
• 2)durable vs non durable goods
• 3)derived demand vs autonomous demand
• 4)industry vs company demand
• 5)short run demand vs long run demand
• 6) total market vs market segment demand
