This document provides an introduction to managerial economics. It defines economics as the study of human economic activity and wealth. It discusses microeconomics as the study of individual consumers and firms, and macroeconomics as the study of aggregate economic activity in a country. Managerial economics bridges traditional economics theory and real business practices by providing tools to help managers make competent decisions. It operates within the constraints of macroeconomic conditions and suggests prescriptive actions to optimally solve problems given a firm's objectives. The scope of managerial economics includes decisions around product selection, production methods, pricing, promotion, and location from an operational and environmental perspective.
Managerial economics is the science of directing scarce resources to manage cost effectively. It uses economic models and theory to analyze business solutions and facilitate decision-making. Some key aspects of managerial economics are that it is concerned with economic decision-making, goal-oriented, pragmatic, both conceptual and quantitative, and provides a link between traditional economics and decision sciences. Managerial economics applies microeconomic theory at the firm level for normative decision-making and concentrates on making economic theory more application-oriented for optimal business problem solutions.
Economics is the study of how individuals, businesses, and societies allocate scarce resources. It examines human behavior in relation to decisions about production, distribution, and consumption of goods and services.
Managerial economics applies economic theory and quantitative methods to managerial decision-making. It helps managers optimize business operations and strategies using tools like demand analysis, cost-benefit analysis, and forecasting. Managerial economics has a wide scope across production, finance, marketing, human resources, and IT departments of an organization.
The document provides an overview of key economic concepts including microeconomics, macroeconomics, demand analysis, determinants of demand, the law of demand, demand curve, demand schedule, exceptions to the law of demand, individual demand versus market demand, circular flow of economic activity, and discusses how market research has found the law of demand is not always applicable in analyzing consumer behavior. It also outlines basic concepts such as scarcity, opportunity cost, productivity, and profit.
1. Managerial economics applies economic theory to business decision making and planning. It deals with optimal allocation of limited resources.
2. The document outlines the scope of managerial economics including demand analysis, cost analysis, pricing decisions, and profit and capital management. It also discusses fundamental economic concepts applied to business like opportunity cost, risk, and elasticity.
3. Managerial economics helps managers with production scheduling, demand forecasting, pricing, and understanding external market factors to inform business strategy and policy.
Introduction to Managerial Economics-Yuvaraja SEYuva Raja S E
The document discusses key concepts in managerial economics. It defines managerial economics as the application of economic theories, principles, and analytical tools to solve managerial problems. Some quantitative techniques used include mathematical and statistical tools to analyze variables, functions, schedules, and graphs to aid decision-making. The principles of opportunity cost, marginalism, equimarginalism, incremental analysis, time perspective, and discounting are also summarized.
Managerial Economics- Introduction,Characteristics and ScopePooja Kadiyan
This document provides an introduction to the scope of managerial economics. It defines managerial economics as the integration of economic theory with business practice to facilitate decision-making. The key areas covered in the scope of managerial economics include microeconomic analysis of the firm, acceptance and use of macroeconomic variables, a normative approach, and an emphasis on case studies. Microeconomics is applied to operational issues like production, costs, pricing, and investment. Macroeconomics is applied to the business environment, including factors like government policies, foreign trade, and the overall economic system.
This document provides an overview of Unit 1 of a course on Managerial Economics. It outlines the key learning outcomes which include explaining the meaning, characteristics, scope, and techniques of managerial economics. It also describes how managerial economics can be applied in decision making, marginal analysis, and optimization. Finally, it provides the estimated time required to complete the unit, a content map of the topics to be covered, and a brief introduction to the first topic - the concept of managerial economics.
Managerial economics is the science of directing scarce resources to manage cost effectively. It uses economic models and theory to analyze business solutions and facilitate decision-making. Some key aspects of managerial economics are that it is concerned with economic decision-making, goal-oriented, pragmatic, both conceptual and quantitative, and provides a link between traditional economics and decision sciences. Managerial economics applies microeconomic theory at the firm level for normative decision-making and concentrates on making economic theory more application-oriented for optimal business problem solutions.
Economics is the study of how individuals, businesses, and societies allocate scarce resources. It examines human behavior in relation to decisions about production, distribution, and consumption of goods and services.
Managerial economics applies economic theory and quantitative methods to managerial decision-making. It helps managers optimize business operations and strategies using tools like demand analysis, cost-benefit analysis, and forecasting. Managerial economics has a wide scope across production, finance, marketing, human resources, and IT departments of an organization.
The document provides an overview of key economic concepts including microeconomics, macroeconomics, demand analysis, determinants of demand, the law of demand, demand curve, demand schedule, exceptions to the law of demand, individual demand versus market demand, circular flow of economic activity, and discusses how market research has found the law of demand is not always applicable in analyzing consumer behavior. It also outlines basic concepts such as scarcity, opportunity cost, productivity, and profit.
1. Managerial economics applies economic theory to business decision making and planning. It deals with optimal allocation of limited resources.
2. The document outlines the scope of managerial economics including demand analysis, cost analysis, pricing decisions, and profit and capital management. It also discusses fundamental economic concepts applied to business like opportunity cost, risk, and elasticity.
3. Managerial economics helps managers with production scheduling, demand forecasting, pricing, and understanding external market factors to inform business strategy and policy.
Introduction to Managerial Economics-Yuvaraja SEYuva Raja S E
The document discusses key concepts in managerial economics. It defines managerial economics as the application of economic theories, principles, and analytical tools to solve managerial problems. Some quantitative techniques used include mathematical and statistical tools to analyze variables, functions, schedules, and graphs to aid decision-making. The principles of opportunity cost, marginalism, equimarginalism, incremental analysis, time perspective, and discounting are also summarized.
Managerial Economics- Introduction,Characteristics and ScopePooja Kadiyan
This document provides an introduction to the scope of managerial economics. It defines managerial economics as the integration of economic theory with business practice to facilitate decision-making. The key areas covered in the scope of managerial economics include microeconomic analysis of the firm, acceptance and use of macroeconomic variables, a normative approach, and an emphasis on case studies. Microeconomics is applied to operational issues like production, costs, pricing, and investment. Macroeconomics is applied to the business environment, including factors like government policies, foreign trade, and the overall economic system.
This document provides an overview of Unit 1 of a course on Managerial Economics. It outlines the key learning outcomes which include explaining the meaning, characteristics, scope, and techniques of managerial economics. It also describes how managerial economics can be applied in decision making, marginal analysis, and optimization. Finally, it provides the estimated time required to complete the unit, a content map of the topics to be covered, and a brief introduction to the first topic - the concept of managerial economics.
Managerial economics applies microeconomic concepts and analysis to help managers make rational decisions. It uses economic theories to help firms overcome problems and achieve objectives. Managerial economics focuses on demand analysis, supply analysis, cost analysis, pricing decisions, profits, and capital management to inform business analysis and decision making. A key function of managers is decision making, which involves selecting the best alternative to efficiently attain goals like profit maximization. Managerial economics helps reduce uncertainty in decisions by analyzing factors like demand, supply, and the business environment.
Nature and Scope of Managerial Economics in relation with other disciplines – Role and Responsibilities of Managerial Economist – Goals of Corporate Enterprises: Maximization of profit - Value of enterprise
Managerial economics applies economic concepts and tools to help managers make rational decisions and solve business problems efficiently. It borrows theories from microeconomics and tools from decision science. The goal is to find optimal solutions to business problems by integrating economic theory, quantitative techniques, and business practice. Managerial economics helps maximize firm effectiveness by facilitating resource allocation and policy formulation. It deals with topics like production, costs, pricing, demand, and market structure at the firm level.
The document discusses economics and business economics. Economics is defined as the study of how individuals and groups allocate scarce resources. Business economics applies economic theories and techniques to solve business problems and aid management decision making. It uses micro and macroeconomic approaches to understand issues like demand, costs, profits, and external factors that influence business. The key aspects of business economics are demand forecasting, cost analysis, profit analysis, and capital management. Overall, the document outlines the basic concepts, scope, importance and determinants of demand within the field of business economics.
This document provides an introduction to the topic of managerial economics. It defines managerial economics as the study of how scarce resources are efficiently directed to achieve managerial goals. The document outlines the nature, scope, and significance of managerial economics. It also discusses the roles and responsibilities of managerial economists in providing analysis to help with production, cost, marketing, investment and other business decisions.
The Major reason for the people’s demand for money is that it is needed in any economy in which almost every person and firm sells goods and services for money and in turn uses money to buy the goods and services offered by others. Functionally this amount of money used as a medium of exchange. Classical theory explained the demand for money as essentially a demand resulting from this need for money as medium of exchange.
In Keynesian theory, money becomes much more than a medium of exchange, much more than a medium of exchange, much more than a device for meeting transactions in the marketplace. People also demand money for speculative purposes and as security against unforeseen needs for cash reserves. The break down of the demand for money into transactions and precautionary and speculative demands plays a vital part in the theory of Keynes.
This document discusses the scope of managerial economics. It summarizes that microeconomics and macroeconomics are applied to business analysis to understand the business environment and solve practical problems. Microeconomics deals with small economic units like firms and consumers, while macroeconomics examines the entire economy and factors such as business cycles, economic policies, and national income. Managerial economics applies microeconomic and macroeconomic theories to analyze internal operational issues and external environmental issues that businesses face.
The document discusses the economic environment and its impact on business. It defines the economic environment as factors such as economic conditions, economic system, policies, and international economic factors that influence business operations. It describes the primary, secondary, tertiary and quaternary stages of economic activity and how environmental factors like economic, social, political, technological, and demographic conditions affect businesses.
Managerial economics applies economic theories, principles, and analytical tools to managerial decision-making. It is the branch of economics that studies the management of a firm. Some key points covered in the document include:
- Managerial economics uses concepts from micro and macro economics. It focuses on applying economic theories to solve practical business problems.
- It involves using analytical tools like mathematical and statistical methods to evaluate alternatives and select optimal choices for issues like pricing, production, costs, profits, and more.
- Managerial economics principles include opportunity cost, marginal analysis, equi-marginal returns, incremental costs and benefits, time value of money, and discounting cash flows.
- Economic models are structural methods
Managerial economics applies economic theories and tools of analysis to help managers make informed business decisions. It involves using concepts like demand analysis, production planning, cost analysis, and pricing to optimize profits. The managerial economist is responsible for forecasting demand, minimizing risks and uncertainties, and advising management on issues like capital investment, pricing, and production planning to maximize business gains. Managerial economics bridges the gap between economic theory and business management practice. It draws from other disciplines like statistics and uses economic models and analysis to solve practical business problems.
Difference between macro and micro economicsMaddali Swetha
Microeconomics studies individual economic decision-making units like consumers, firms, and industries, while macroeconomics analyzes the economy as a whole in terms of aggregate supply and demand. The key difference is that microeconomics focuses on micro-level variables and macroeconomics focuses on macro-level or economy-wide variables. Microeconomics tools include supply and demand analysis and factor pricing, while macroeconomics tools include analyzing GDP, inflation, unemployment, and other indicators of overall economic performance. Both are important areas of economics that provide insights, though each operates at different levels of analysis.
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Mohammad Abadullah
Dilruba Jahan Popi
Rabiul Islam
Effat Ara Saima
MD. Rajib Mojumder (Captain)
The Indian financial system plays a vital role in the country's economic development by facilitating savings, investment, and capital formation. It consists of four main components: financial institutions that act as intermediaries between savers and borrowers, financial assets that are traded in markets, financial services provided by asset managers, and financial markets where trading of money, bonds, and shares occurs. The key financial institutions are banks, which accept deposits and provide loans, and non-banking institutions like insurance companies. Important financial assets include treasury bills, certificates of deposit, and commercial paper.
1. There are different types of probability including a priori, statistical, and estimated probabilities which involve judgment under uncertainty.
2. Risk involves known outcomes and probabilities, while uncertainty involves unknown or imprecisely estimated outcomes and probabilities. Most real-life decisions involve uncertainty.
3. The precautionary principle is meant to ensure absence of scientific certainty is not used to postpone actions to protect people and environment from credible threats of serious harm.
This document defines risk and uncertainty and discusses various types of risks. It begins by defining risk as outcomes that can be assigned probabilities based on historical data, while uncertainty refers to outcomes that are too uncertain to assign probabilities. It then discusses different types of risks like market risk, credit risk, liquidity risk, and operational risk. It also discusses approaches to evaluate risk like using a risk-adjusted discount rate, certainty equivalent, and decision trees.
The kinked demand curve model assumes that in an oligopolistic industry, firms will quickly match any price cuts by competitors but will not follow price increases, leading to an asymmetrically kinked demand curve. Specifically, (1) if one firm cuts prices, others will match and demand is inelastic, but (2) if one firm raises prices, others will not match and demand is elastic as customers switch to cheaper alternatives, maintaining a prevailing market price.
Money refers to anything of value that is generally accepted as a medium of exchange. The demand for money is derived from its use in transactions and as a store of value. Legal tender laws require that a country's currency must be accepted for payment of debts. There are various definitions of money supply that include currency in circulation, demand deposits, savings accounts, and other assets that can be easily converted into cash. Inflation is a sustained increase in the general price level over time, and can be caused by factors that increase aggregate demand such as growth in the money supply, incomes, government spending, and capital inflows.
Business economics deals with the application of economic theories and principles to solve business problems and aid management decision making. It involves using economic methodology to analyze issues like demand forecasting, cost analysis, profit analysis, and capital management at the level of individual firms. The study of business economics has both theoretical and practical significance. It helps understand economic behavior, assess economic performance, aid in economic planning and policymaking, and solve problems faced by various groups like businessmen, bankers, and policymakers. Overall, business economics integrates economic theory with business practice to facilitate optimal business decision making and planning.
The document discusses business environment and its analysis. It defines business and environment, and explains that business environment refers to factors that surround and influence a business. The types of business environment include internal environment, micro environment and macro environment. The objectives and importance of analyzing the business environment are also outlined. The key steps in environmental scanning and analysis include identifying factors, selecting relevant factors, defining variables, forecasting factors, and developing profiles to inform strategic decision making.
This document provides an introduction to managerial economics. It discusses key concepts in managerial economics including demand analysis, pricing strategies, production and cost analysis, and capital allocation. It also outlines the scope of managerial economics, covering operational issues within a business like demand forecasting, pricing, production, and resource allocation, as well as external environmental issues like economic trends, financial markets, and government policy. The relationship between managerial economics and other disciplines like economics, management, mathematics, and statistics is also described. Finally, some basic economic tools for managerial decision making are introduced, such as opportunity cost, incremental analysis, time value of money, and equi-marginal returns.
This document provides an overview of engineering economics and key economic concepts. It discusses:
1. The unit introduces engineering economics and covers topics like demand analysis, elasticity, and forecasting techniques.
2. It defines economics and explains that economics studies how individuals and nations earn and spend money.
3. The key steps in engineering economic studies are outlined as the creative, definition, conversion, and decision steps.
Managerial economics applies microeconomic concepts and analysis to help managers make rational decisions. It uses economic theories to help firms overcome problems and achieve objectives. Managerial economics focuses on demand analysis, supply analysis, cost analysis, pricing decisions, profits, and capital management to inform business analysis and decision making. A key function of managers is decision making, which involves selecting the best alternative to efficiently attain goals like profit maximization. Managerial economics helps reduce uncertainty in decisions by analyzing factors like demand, supply, and the business environment.
Nature and Scope of Managerial Economics in relation with other disciplines – Role and Responsibilities of Managerial Economist – Goals of Corporate Enterprises: Maximization of profit - Value of enterprise
Managerial economics applies economic concepts and tools to help managers make rational decisions and solve business problems efficiently. It borrows theories from microeconomics and tools from decision science. The goal is to find optimal solutions to business problems by integrating economic theory, quantitative techniques, and business practice. Managerial economics helps maximize firm effectiveness by facilitating resource allocation and policy formulation. It deals with topics like production, costs, pricing, demand, and market structure at the firm level.
The document discusses economics and business economics. Economics is defined as the study of how individuals and groups allocate scarce resources. Business economics applies economic theories and techniques to solve business problems and aid management decision making. It uses micro and macroeconomic approaches to understand issues like demand, costs, profits, and external factors that influence business. The key aspects of business economics are demand forecasting, cost analysis, profit analysis, and capital management. Overall, the document outlines the basic concepts, scope, importance and determinants of demand within the field of business economics.
This document provides an introduction to the topic of managerial economics. It defines managerial economics as the study of how scarce resources are efficiently directed to achieve managerial goals. The document outlines the nature, scope, and significance of managerial economics. It also discusses the roles and responsibilities of managerial economists in providing analysis to help with production, cost, marketing, investment and other business decisions.
The Major reason for the people’s demand for money is that it is needed in any economy in which almost every person and firm sells goods and services for money and in turn uses money to buy the goods and services offered by others. Functionally this amount of money used as a medium of exchange. Classical theory explained the demand for money as essentially a demand resulting from this need for money as medium of exchange.
In Keynesian theory, money becomes much more than a medium of exchange, much more than a medium of exchange, much more than a device for meeting transactions in the marketplace. People also demand money for speculative purposes and as security against unforeseen needs for cash reserves. The break down of the demand for money into transactions and precautionary and speculative demands plays a vital part in the theory of Keynes.
This document discusses the scope of managerial economics. It summarizes that microeconomics and macroeconomics are applied to business analysis to understand the business environment and solve practical problems. Microeconomics deals with small economic units like firms and consumers, while macroeconomics examines the entire economy and factors such as business cycles, economic policies, and national income. Managerial economics applies microeconomic and macroeconomic theories to analyze internal operational issues and external environmental issues that businesses face.
The document discusses the economic environment and its impact on business. It defines the economic environment as factors such as economic conditions, economic system, policies, and international economic factors that influence business operations. It describes the primary, secondary, tertiary and quaternary stages of economic activity and how environmental factors like economic, social, political, technological, and demographic conditions affect businesses.
Managerial economics applies economic theories, principles, and analytical tools to managerial decision-making. It is the branch of economics that studies the management of a firm. Some key points covered in the document include:
- Managerial economics uses concepts from micro and macro economics. It focuses on applying economic theories to solve practical business problems.
- It involves using analytical tools like mathematical and statistical methods to evaluate alternatives and select optimal choices for issues like pricing, production, costs, profits, and more.
- Managerial economics principles include opportunity cost, marginal analysis, equi-marginal returns, incremental costs and benefits, time value of money, and discounting cash flows.
- Economic models are structural methods
Managerial economics applies economic theories and tools of analysis to help managers make informed business decisions. It involves using concepts like demand analysis, production planning, cost analysis, and pricing to optimize profits. The managerial economist is responsible for forecasting demand, minimizing risks and uncertainties, and advising management on issues like capital investment, pricing, and production planning to maximize business gains. Managerial economics bridges the gap between economic theory and business management practice. It draws from other disciplines like statistics and uses economic models and analysis to solve practical business problems.
Difference between macro and micro economicsMaddali Swetha
Microeconomics studies individual economic decision-making units like consumers, firms, and industries, while macroeconomics analyzes the economy as a whole in terms of aggregate supply and demand. The key difference is that microeconomics focuses on micro-level variables and macroeconomics focuses on macro-level or economy-wide variables. Microeconomics tools include supply and demand analysis and factor pricing, while macroeconomics tools include analyzing GDP, inflation, unemployment, and other indicators of overall economic performance. Both are important areas of economics that provide insights, though each operates at different levels of analysis.
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Mohammad Abadullah
Dilruba Jahan Popi
Rabiul Islam
Effat Ara Saima
MD. Rajib Mojumder (Captain)
The Indian financial system plays a vital role in the country's economic development by facilitating savings, investment, and capital formation. It consists of four main components: financial institutions that act as intermediaries between savers and borrowers, financial assets that are traded in markets, financial services provided by asset managers, and financial markets where trading of money, bonds, and shares occurs. The key financial institutions are banks, which accept deposits and provide loans, and non-banking institutions like insurance companies. Important financial assets include treasury bills, certificates of deposit, and commercial paper.
1. There are different types of probability including a priori, statistical, and estimated probabilities which involve judgment under uncertainty.
2. Risk involves known outcomes and probabilities, while uncertainty involves unknown or imprecisely estimated outcomes and probabilities. Most real-life decisions involve uncertainty.
3. The precautionary principle is meant to ensure absence of scientific certainty is not used to postpone actions to protect people and environment from credible threats of serious harm.
This document defines risk and uncertainty and discusses various types of risks. It begins by defining risk as outcomes that can be assigned probabilities based on historical data, while uncertainty refers to outcomes that are too uncertain to assign probabilities. It then discusses different types of risks like market risk, credit risk, liquidity risk, and operational risk. It also discusses approaches to evaluate risk like using a risk-adjusted discount rate, certainty equivalent, and decision trees.
The kinked demand curve model assumes that in an oligopolistic industry, firms will quickly match any price cuts by competitors but will not follow price increases, leading to an asymmetrically kinked demand curve. Specifically, (1) if one firm cuts prices, others will match and demand is inelastic, but (2) if one firm raises prices, others will not match and demand is elastic as customers switch to cheaper alternatives, maintaining a prevailing market price.
Money refers to anything of value that is generally accepted as a medium of exchange. The demand for money is derived from its use in transactions and as a store of value. Legal tender laws require that a country's currency must be accepted for payment of debts. There are various definitions of money supply that include currency in circulation, demand deposits, savings accounts, and other assets that can be easily converted into cash. Inflation is a sustained increase in the general price level over time, and can be caused by factors that increase aggregate demand such as growth in the money supply, incomes, government spending, and capital inflows.
Business economics deals with the application of economic theories and principles to solve business problems and aid management decision making. It involves using economic methodology to analyze issues like demand forecasting, cost analysis, profit analysis, and capital management at the level of individual firms. The study of business economics has both theoretical and practical significance. It helps understand economic behavior, assess economic performance, aid in economic planning and policymaking, and solve problems faced by various groups like businessmen, bankers, and policymakers. Overall, business economics integrates economic theory with business practice to facilitate optimal business decision making and planning.
The document discusses business environment and its analysis. It defines business and environment, and explains that business environment refers to factors that surround and influence a business. The types of business environment include internal environment, micro environment and macro environment. The objectives and importance of analyzing the business environment are also outlined. The key steps in environmental scanning and analysis include identifying factors, selecting relevant factors, defining variables, forecasting factors, and developing profiles to inform strategic decision making.
This document provides an introduction to managerial economics. It discusses key concepts in managerial economics including demand analysis, pricing strategies, production and cost analysis, and capital allocation. It also outlines the scope of managerial economics, covering operational issues within a business like demand forecasting, pricing, production, and resource allocation, as well as external environmental issues like economic trends, financial markets, and government policy. The relationship between managerial economics and other disciplines like economics, management, mathematics, and statistics is also described. Finally, some basic economic tools for managerial decision making are introduced, such as opportunity cost, incremental analysis, time value of money, and equi-marginal returns.
This document provides an overview of engineering economics and key economic concepts. It discusses:
1. The unit introduces engineering economics and covers topics like demand analysis, elasticity, and forecasting techniques.
2. It defines economics and explains that economics studies how individuals and nations earn and spend money.
3. The key steps in engineering economic studies are outlined as the creative, definition, conversion, and decision steps.
This document provides an overview of engineering economics and managerial economics. It defines economics as the study of human activity and wealth at both the individual and national levels. It then discusses key concepts in engineering economics like the four steps of planning an economic study. Microeconomics is defined as the study of individual consumers and firms, while macroeconomics is the study of aggregate economic activity at the national level. Finally, it outlines the scope of managerial economics, including demand analysis, pricing strategies, production and cost analysis, and resource allocation.
1) Managerial economics refers to applying economic theory to managerial decision making in businesses. It informs decisions related to production, pricing, investment, and other areas.
2) Managerial economics draws on microeconomics but also considers macroeconomic factors. It makes normative and prescriptive recommendations to help managers optimize outcomes.
3) Key applications of managerial economics include demand analysis, pricing strategies, production and cost analysis, resource allocation, and investment analysis. These areas help managers maximize profits within the economic environment.
This document discusses fundamentals of business economics. It explains that business economics uses economic tools and theories to help businessmen make decisions. It also discusses key principles of business economics like incremental concept, opportunity cost concept, and risk and uncertainty. The document outlines the scope of business economics, including demand analysis, cost and production analysis, and pricing decisions. It explains that business economics is important as it enables managers to select suitable tools from economics to make better business decisions. However, it also notes some limitations of business economics like predictions being unpredictable and non-replicable.
Managerial Economics & Financial Analysis(MEFA)_e Notes_Part-1Venkat. P
This document provides an overview and introduction to managerial economics. It discusses key topics including:
- The definition and scope of managerial economics, including how it draws from both economics and management.
- The relationship between managerial economics and other disciplines like microeconomics, macroeconomics, mathematics, statistics, and operations research.
- An introduction to demand analysis, including the factors that influence demand like price, income, tastes, number of consumers, and expectations about future prices.
- The document serves to outline the basic concepts and areas of application of managerial economics for managers.
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Managerial economics deals with applying economic theory and techniques to business management problems to help managers make optimal decisions. It uses tools from microeconomics, macroeconomics, mathematics, statistics, and econometrics. Managerial economics is both a positive and normative science, describing economic phenomena and relationships as well as prescribing optimal solutions to business problems based on economic principles and analysis. The three fundamental concepts of managerial economics are pricing, distribution, and welfare.
Managerial economics deals with applying microeconomic principles to managerial decision-making. It helps managers optimize decisions by analyzing costs, profits, demand, and resource allocation. The document discusses how managerial economics uses both positive and normative approaches, drawing on micro and macroeconomics. It also examines how managerial economics relates to other disciplines and helps managers make well-informed choices under uncertainty.
Economics is the study of how individuals and societies choose to use the scarce resources that nature and the previous generation have provided. The world‟s resources are limited and scarce. The resources which are not scarce are called free goods. Resources which are scarce are called economic goods.
Managerial economics is the application of economic theory and methodology to managerial decision making. It helps managers optimize business behavior and integrate economic theory with business practice to facilitate optimal decision making. Some key concepts in managerial economics include opportunity cost, marginality, production possibility frontier, and discounting principle. Managerial economics uses both microeconomic and macroeconomic analysis to address internal business issues like production, pricing, investment decisions as well as external issues like industry trends and government policies. The goal is to help managers make rational economic choices and maximize profits given scarce resources.
Basic principles in the application of managerial economicsMilan Verma
Basic Principles in the Application of Managerial Economics, what is economics and introduction, Micro economics
Normative (prescriptive) science, Pragmatic (Practical), Uses Macro economics, Uses theory of firm, Management oriented, Multi disciplinary, Art and science. Scope of Managerial Economics, theory of demand and demand analysis, envirmental issues, Significance of managerial economics in decision making, Significance of managerial economics in decision making
Premier University
[B.B.A]
Course Teacher: Assistant Professor. Anupam Das
University of Chittagong
Course Title: Managerial Economic
Presentation Subject: Introduction to Managerial Economic
Semester: 7th Section: “A” Batch :22nd
Group Name: D’14
E-mail : mdsaimonchy@yahoo.com
Business Economics concerns the application of economic theory and tools to business decision making. It helps managers address issues like choosing optimal production levels and input mixes, determining appropriate pricing strategies given market conditions, managing inventories, assessing risks and uncertainties, and allocating scarce resources. While based largely in microeconomics, Business Economics also incorporates some macroeconomic analysis to help understand the broader economic environment. Its scope encompasses using economic theories and analysis to address both internal operational issues for businesses, as well as external environmental factors that impact firms.
Managerial economics applies microeconomic and macroeconomic theories and principles to help managers solve business problems and make optimal decisions. It uses tools from various disciplines like accounting, finance, statistics, and more. Managerial economics helps analyze issues like demand, production, pricing, costs, profits, competition, investments, and the impact of the economic environment. The document provides definitions of managerial economics, discusses its nature and significance for management. It also outlines the scope of managerial economics and the role of a managerial economist in advising businesses.
Managerial economics applies microeconomic and macroeconomic analysis to help managers make business decisions and maximize profit. While traditional economics studies economic principles and theories broadly, managerial economics focuses specifically on applying economic concepts to solve practical problems faced by individual firms. The key differences are that managerial economics is micro-focused, normative, and practical, seeking to improve business efficiency, whereas traditional economics is broader in scope and can be both positive and normative in nature.
This document provides an introduction to managerial economics and demand analysis. It discusses key topics including:
- The objectives of managerial economics in understanding concepts like demand, elasticity, and demand forecasting.
- An overview of demand analysis including the demand function, law of demand, price elasticity, factors determining price elasticity, and demand forecasting methods.
- The relationship between managerial economics and other subjects like traditional economics, operations research, statistics, accounting, psychology, organizational behavior, and computer science in assisting managerial decision making.
This document provides an overview of economics and managerial economics. It defines economics as the study of how scarce resources are used (Lionel Robbins definition). Managerial economics is introduced as the application of economic theories and methodology to practical business problems to help managers make optimal decisions. The document outlines key differences between traditional economics and managerial economics, including that managerial economics focuses specifically on microeconomic problems at the firm level from a goal-oriented, pragmatic perspective. The scope of managerial economics is discussed as including demand analysis, production/supply analysis, market structure/pricing theory, and cost analysis to help business decision making.
UNIT - I: INTRODUCTION TO BUSINESS ECONOMICS: Definition - Nature and Scope -
The Role of economists in an organization; BASIC ECONOMIC PRINCIPLES: The concept
of Opportunity Cost - Discounting principle - Time perspective - Incremental Concept –
Equi-Marginalism; OBJECTIVES OF THE FIRM: Profit Maximization - Sales Maximization
and other objectives.
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An investor is a person who allocates capital with the expectation of a future financial return. Types of investment include : equity , debt securities , real estates, currency , and commodity , derivatives such as put and call options, etc,
Unit 1 introduction to investment & portfolio managementShaik Mohammad Imran
The document provides an introduction to investment and portfolio management. It defines key terms like individual investor, investment, economic investment, and financial investment. It discusses the different objectives of investment such as financial objectives, personal objectives, and objectives based on the investor's approach like short-term vs long-term priorities. It also covers the concepts of portfolio, the investment process of setting policies, analyzing investments, creating a diversified portfolio, revising it over time, and evaluating performance. It distinguishes between investment and speculation.
This document discusses the concepts and process of fundamental analysis for making investment decisions. It explains that fundamental analysis examines the intrinsic value of a company by analyzing the economy, industry, and company. The analysis involves 3 phases - evaluating the economy, industry life cycle stages (pioneering, expansion, stagnation), and company financial ratios to determine if the stock is under or overvalued compared to market price. Making investment decisions requires understanding these fundamental analysis concepts.
Ratio analysis involves calculating and analyzing relationships between financial data points to assess the financial position and performance of a company. It is useful for strategic decision making, financial planning, and identifying weak areas of a business. Key types of ratios include profitability, liquidity, activity, and leverage ratios. Profitability ratios measure profit earning capacity, liquidity ratios assess ability to meet short-term obligations, activity ratios evaluate efficient use of assets, and leverage ratios examine ability to meet long-term debt obligations. Ratio analysis is an important financial analysis technique.
Partnership is a business relationship between two or more persons who agree to share the profits or losses of the business. Key features include an agreement to conduct business together and share profits/losses, unlimited liability of the partners, and flexibility to divide responsibilities. A partnership deed is a written agreement that outlines terms like capital contributions, profit/loss sharing ratios, partner roles, and dissolution procedures. The advantages of a partnership include easier formation, larger capital availability, flexibility, and quick decision making. However, partnerships also have disadvantages like potential lack of harmony between partners, instability risk with partner changes, and limited growth potential compared to other business structures.
Accounting has existed for thousands of years, with evidence of accounting practices found in ancient Babylon from 2600 BC. However, modern accounting using double-entry bookkeeping was established in the 15th century by Fra Luka Paciolo. Accounting was also practiced in ancient India as described in Kautilya's Arthashastra, but modern accounting was introduced after 1850 with the formation of joint stock companies. Accounting involves systematically recording all financial transactions and preparing reports and interpreting the information to analyze a business's performance and financial position.
This document discusses capital budgeting and capital budgeting techniques. It begins by defining capital budgeting as the process of making long-term investment decisions. It then outlines the capital budgeting process as including project generation, evaluation, selection, and execution. Several capital budgeting techniques are described, including payback period, accounting rate of return, net present value, internal rate of return, and probability index methods. The techniques are defined and their merits and demerits are summarized.
This document discusses various options for starting a business in the InfoTech industry, including buying and selling, manufacturing, repair workshops, software development, hardware design, and consulting. It notes that after choosing an activity, an entrepreneur must then decide whether to be a sole trader, form a partnership, be a global player with large resources, form a joint stock company, or promote a public enterprise with government involvement. To evaluate each alternative, understanding how to assess each option is necessary.
There are several pricing methods used by firms in practice that do not always follow the microeconomic principle of setting price equal to marginal cost. These include cost-based pricing methods like full-cost pricing, cost-plus pricing, and marginal cost pricing. Competition-based methods include going rate pricing and sealed bid pricing. Demand-based pricing considers consumer perceptions and the intensity of demand, using methods like perceived value pricing and differential pricing. Strategy-based pricing for new products involves either skimming pricing to earn high initial profits or penetration pricing to gain market share through lower initial prices. In reality, firms adopt a mix of pricing methods rather than relying on just one.
1) Monopolistic competition is an imperfect market structure between perfect competition and monopoly. It is characterized by many small businesses that sell differentiated products that are close substitutes for one another.
2) Firms have some control over prices under monopolistic competition. While there are many buyers and sellers, product differentiation gives firms some monopoly power over their brand.
3) In both the short run and long run, a monopolistically competitive firm will be in equilibrium when marginal revenue equals marginal cost, allowing the firm to maximize its profits. In the short run, firms can earn supernormal profits if price is above average cost.
1. Monopoly is defined as a market situation where there is only one seller of a product without close substitutes. The key features are a single firm, no close substitutes, and the firm being a price maker.
2. There are several types of monopolies including legal, voluntary, government, private, limited, unlimited, single price, discriminating, and natural monopolies.
3. As the sole producer, a monopolist has complete control over supply and can influence prices. They face a downward sloping demand curve and set price and output at the point where marginal cost equals marginal revenue to maximize profits.
Perfect competition refers to a market structure with many small businesses producing identical goods or services. Key characteristics include a large number of buyers and sellers, all transacting at a single market-determined price. Firms are price-takers and can freely enter or exit the market. Equilibrium for an individual firm occurs where marginal revenue equals marginal cost, meaning the firm maximizes profits. Equilibrium for the industry as a whole is reached through the interaction of total industry supply and demand determining the single market price.
Market structure describes the competitive environment in a market. Perfect competition refers to a market structure where competition among buyers and sellers is most prevalent. The key characteristics of a perfectly competitive market include: a large number of small businesses, standardized products, free entry and exit, perfect knowledge, and price-taking behavior. Equilibrium for a firm in perfect competition occurs where marginal cost equals marginal revenue and the marginal cost curve cuts the marginal revenue curve from below, indicating the firm has no incentive to further expand or contract output. The price in a perfectly competitive market is determined by the intersection of industry-wide demand and supply, with individual firms being price-takers rather than price-makers.
The document discusses key concepts in break-even analysis including:
1. Assumptions made in break-even analysis like fixed costs remaining constant and variable costs varying proportionally with output.
2. Merits of break-even analysis like easily understanding cost-volume-profit relationships and aiding management decision making.
3. Demerits of break-even analysis like ignoring other business factors and assuming costs are perfectly linear.
4. Key terms used in break-even analysis like fixed costs, variable costs, contribution, margin of safety, angle of incidence, profit-volume ratio, and break-even point.
5. Formulas for calculating items like contribution, margin of safety, and break-even point
1. The document discusses various cost concepts that are important for managerial decision making including opportunity costs, explicit vs implicit costs, historical vs replacement costs, fixed vs variable costs, and short-run vs long-run costs.
2. It explains the relationship between total, average, and marginal costs in both the short-run and long-run. In the short-run, total fixed costs remain fixed while variable costs change with output. In the long-run, all costs are variable.
3. Understanding the cost-output relationship is important for cost control, profit prediction, pricing, and other decisions. Cost is influenced by factors like scale of production, output level, input prices, and technology.
1) Economies of scale can provide cost advantages both internally for individual large firms and externally for entire industries. Internal economies come from factors like indivisibilities and specialization that allow larger firms to utilize resources more efficiently. External economies benefit all firms in an industry as it grows in size.
2) Internal economies for individual firms include technical, managerial, marketing, financial, risk bearing, research, and welfare economies from specialized departments, equipment, management, purchasing power, risk absorption, innovation, and worker benefits.
3) External economies for entire industries include concentration, information, welfare, and disintegration economies from shared infrastructure, industry organizations, community development, and specialized sub-industries. Both internal and external
1. The production function expresses the relationship between inputs like labor, capital, land, etc. and the quantity of output produced. It defines output as a function of various inputs.
2. Cobb-Douglas production functions take the form Y=(AK^x L^(1-x)) and model output (Y) as a function of capital (K) and labor (L). They assume constant returns to scale and that factors are substitutable up to a limit.
3. Isoquants represent combinations of two variable inputs, like capital and labor, that produce the same level of output. They are used to analyze least-cost input combinations that maximize producer profit or minimize costs.
This document discusses demand forecasting methods used by businesses. It describes short-term and long-term demand forecasting and their purposes. Short-term forecasting relates to existing production capacity and helps with pricing and financial policies, while long-term forecasting informs new plant planning and product demand. The document also outlines survey methods like opinion surveys of salespeople and expert opinions, as well as statistical methods like time series analysis, barometric techniques, and regression/correlation analysis that use past data to project future trends.
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Enhancing Asset Quality: Strategies for Financial Institutionsshruti1menon2
Ensuring robust asset quality is not just a mere aspect but a critical cornerstone for the stability and success of financial institutions worldwide. It serves as the bedrock upon which profitability is built and investor confidence is sustained. Therefore, in this presentation, we delve into a comprehensive exploration of strategies that can aid financial institutions in achieving and maintaining superior asset quality.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
New Visa Rules for Tourists and Students in Thailand | Amit Kakkar Easy VisaAmit Kakkar
Discover essential details about Thailand's recent visa policy changes, tailored for tourists and students. Amit Kakkar Easy Visa provides a comprehensive overview of new requirements, application processes, and tips to ensure a smooth transition for all travelers.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Does teamwork really matter? Looking beyond the job posting to understand lab...
1 introduction to managerial economics
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Introduction To Managerial Economics
Introduction to Economics
Economics is a study of human activity both at individual and national level. The economists of
early age treated economics merely as the science of wealth. The reasonfor this is clear. Every one of us
in involvedin efforts aimed at earningmoney andspendingthis money to satisfy ourwantssuchas food,
Clothing, shelter, and others. Such activities of earning and spending money are called “Economic
activities”. It was only duringthe eighteenth centurythat Adam Smith, the Fatherof Economics, defined
economics as the study of nature and uses of national wealth’.
Dr. Alfred Marshall,one of the greatesteconomistsof thenineteenthcentury,writes “Economics
is a study of man’s actions in the ordinary businessof life: it enquireshow he gets his income andhow he
uses it”.
Thus, it is one side, a study of wealth; and on the other, and more important side; it is the study
of man. AsMarshallobserved,thechief aim of economics is to promote‘humanwelfare’, butnot wealth.
The definition given by ACPigouendorsestheopinion of Marshall.PigoudefinesEconomics as“the study
of economic welfare thatcan be broughtdirectly andindirectly, into relationshipwith the measuringrod
of money”.
Lord Keynes defined economics as ‘the study of the administration of scarce means and the
determinants of employments and income”.
Microeconomics
The study of an individual consumer or a firm is called microeconomics (also called the Theory of
Firm). Micro means ‘one millionth’. Microeconomics deals with behaviour and problems of single
individual and of micro organization. Managerialeconomics has its roots in microeconomics and it deals
with the micro or individualenterprises.It is concernedwith the applicationof theconcepts suchas price
theory, Law of Demand and theories of market structure and so on.
Macroeconomics
The studyof ‘aggregate’ortotallevel of economics activity in a country is called macroeconomics.
It studies the flow of economics resources or factors of production (such as land, labour, capital,
organisationandtechnology)from theresource owner to thebusinessfirms and thenfrom the business
firms to the households. It deals with total aggregates, for instance, total national income total
employment, output and total investment. It studies the interrelations among various aggregates and
examines their natureand behaviour,their determination andcauses of fluctuationsin the. It deals with
the price level in general, instead of studying the prices of individual commodities. It is concerned with
the level of employment in the economy. It discusses aggregate consumption, aggregate investment,
price level, and payment, theories of employment, and so on. Though macroeconomics provides the
necessary framework in term of governmentpolicies etc., for the firm to act upon dealing with analysis
of business conditions, it has less direct relevance in the study of theory of firm.
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Management
Management is the science and art of getting things done throughpeople in formally organized
groups.It is necessary thatevery organisationbe well managed to enable it to achieve its desired goals.
Management includes a number of functions: Planning, organizing, staffing, directing, and controlling.
The managerwhile directing the efforts of his staff communicates to themthe goals, objectives, policies,
and procedures; coordinates their efforts; motivates them to sustain their enthusiasm; and leads them
to achieve the corporate goals.
Managerial Economics
Introduction
Managerial Economics refers to the firm’s decision making process. It could be also interpreted
as “Economics of Management” or “Economics of Management”.
Managerial Economics is also called as “Industrial Economics” or “Business Economics”. As Joel
Dean observes managerial economics shows how economic analysis can be used in formulating polices.
Meaning & Definition:
In the words of E. F. Brigham and J. L. Pappas Managerial Economics is “the applications of economics
theory and methodology to business administration practice”.
Managerial Economics bridges the gap between traditional economics theory and real business practices in
two days. First it provides a number of tools and techniques to enable the manager to become more competent
to take decisions in real and practical situations. Secondly it serves as an integrating course to show the
interaction between various areas in which the firm operates.
Nature of Managerial Economics
Managerialeconomics is, perhaps, the youngestof allthe social sciences. Since it originates from
Economics, it hasthebasis featuresof economics, suchasassumingthatotherthingsremainingthesame
(or the Latin equivalent ceteris paribus). This assumption is made to simplify the complexity of the
managerial phenomenon under study in a dynamic business environment so many things are changing
simultaneously.
This set a limitation that we cannot really hold other things remaining the same. In such a case,
the observations made out of such a study will have a limited purpose or value. Managerial economics
also has inherited this problem from economics. Further,it is assumed that the firm or the buyer acts in
a rational manner (which normally does not happen). The buyer is carried away by the advertisements,
brand loyalties, incentives and so on, and, therefore, the innate behaviour of the consumer will be
rational is not a realistic assumption. Unfortunately, there are no other alternatives to understand the
subject other thanby making such assumptions.This is because the behaviourof a firm or a consumer is
a complex phenomenon.
The otherfeatures of managerialeconomics are explained as below:
(a) Close to microeconomics: Managerial economics is concerned with finding the solutions for
different managerial problems of a particular firm. Thus, it is more close to microeconomics.
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(b) Operates against the backdrop of macroeconomics: The macroeconomics conditions of the
economy are also seen as limiting factors for the firm to operate. In other words, the managerial
economist has to be aware of the limits set by the macroeconomics conditions such as government
industrial policy, inflation and so on.
(c)Normativestatements:A normative statementusuallyincludesor implies the words ‘ought’or
‘should’. They reflect people’s moral attitudes and are expressions of what a team of people ought to
do. For instance, it deals with statements such as ‘Government of India should open up the economy.
Such statement are based on value judgments and express views of what is ‘good’ or ‘bad’, ‘right’ or ‘
wrong’. One problem with normative statements is that they cannot to verify by looking at the facts,
because they mostly deal with the future. Disagreements about such statements are usually settled by
voting on them.
(d) Prescriptive actions: Prescriptive action is goal oriented. Given a problem and the objectives
of the firm, it suggests the course of action from the available alternatives for optimal solution. If does
not merely mention the concept, it alsoexplains whether the concept can be applied in a given context
on not.For instance, the fact that variablecosts are marginal costs can be used to judge the feasibility of
an export order.
(e) Applied in nature: ‘Models’ are built to reflect the real life complex business situations and
these models are of immense help to managers for decision-making. The different areas where models
are extensively used include inventory control, optimization, project management etc. In managerial
economics, we also employ case study methods to conceptualize the problem, identify that alternative
and determine the best course of action.
(f) Offers scope to evaluate each alternative: Managerial economics provides an opportunity to
evaluateeach alternativein terms of its costsand revenue. The managerialeconomist can decide which
is the better alternative to maximize the profits for the firm.
(g) Interdisciplinary:Thecontents,toolsandtechniquesof managerialeconomics are drawnfrom
different subjects such as economics, management, mathematics, statistics, accountancy, psychology,
organizational behaviour, sociology and etc.
(h) Assumptions and limitations: Every concept and theory of managerial economics is based on
certain assumptionand as such their validity is not universal.Where there is change in assumptions,the
theory may not hold good at all.
Scope of Managerial Economics:
The scope of managerial economics refers to its area of study. Managerial economics refers to its area
of study. Managerial economics, Provides management with a strategic planning tool that can be used
to get a clear perspective of the way the business world works and what can be done to maintain
profitability in an ever-changing environment. Managerial economics is primarily concerned with the
application of economic principles and theories to five types of resource decisions made by all types of
business organizations.
a. The selection of product or service to be produced.
b. The choice of productionmethods and resource combinations.
c. The determination of the best price and quantity combination
d. Promotional strategyand activities.
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e. The selection of the location from which to produce and sellgoods or service to consumer.
The productiondepartment,marketing and salesdepartment and the finance departmentusually
handlethese five types of decisions.
The scope of managerialeconomics covers two areasof decision making
a. Operational or Internal issues
b. Environmental or External issues
a. Operational issues:
Operational issuesrefer to those, which wise within the businessorganization and they are under
the controlof the management. Those are:
1. Theory of demandand Demand Forecasting
2. Pricing and Competitive strategy
3. Production cost analysis
4. Resource allocation
5. Profit analysis
6. Capital or Investment analysis
7. Strategic planning
1. Demand Analyses and Forecasting:
A firm can survive only if it is able to the demand for its product at the right time, within the right
quantity. Understanding the basic concepts of demand is essential for demand forecasting. Demand
analysis should be a basic activity of the firm because many of the other activities of the firms depend
upon the outcome of the demand for cost. Demand analysis provides: 1. The basis for analyzing market
influences onthefirms; productsandthushelpsintheadaptationtothoseinfluences. 2. Demand analysis
also highlightsfor factors, which influence the demand for a product.This helps to manipulate demand.
Thus demand analysis studies not only the price elasticity but also income elasticity, cross elasticity as
well as the influence of advertising expenditure with the adventof computers, demand forecasting has
become an increasingly important function of managerial economics.
2. Pricing and competitive strategy:
Pricing decisions have been always within the preview of managerial economics. Pricing policies are
merely a subset of broader class of managerial economic problems. Price theory helps to explain how
prices are determined under different types of market conditions. Competitions analysis includes the
anticipation of the response of competitions the firm’s pricing, advertising and marketing strategies.
Product line pricing and price forecasting occupy an important place here.
3. Production and cost analysis:
Production analysis is in physical terms. While the cost analysis is in monetary terms cost concepts and
classifications, cost-out-put relationships, economies and diseconomies of scale and production
functions are some of the points constituting cost and production analysis.
4. Resource Allocation:
ManagerialEconomics is the traditionaleconomic theory thatis concernedwith the problemof optimum
allocation of scarce resources. Marginal analysis is applied to the problem of determining the level of
output, which maximizes profit. In this respect linear programming techniques has been used to solve
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optimization problems. In fact lines programming is one of the most practical and powerful managerial
decision making tools currently available.
5. Profit analysis:
Profit making is the major goal of firms. There are several constraints here an account of competition
from other products,changinginput prices and changingbusiness environment hence in spite of careful
planning, there is always certain risk involved. Managerial economics deals with techniques of averting
of minimizing risks. Profit theory guides in the measurement and management of profit, in calculating
the pure return on capital, besides future profit planning.
6. Capital or investment analyses:
Capital is the foundation of business.Lack of capital may resultin small size of operations. Availability of
capital from various sources like equity capital, institutional finance etc. may help to undertake large-
scale operations. Hence efficient allocation and management of capital is one of the most important
tasksof themanagers.The major issuesrelatedtocapital analysisare: 1.The choice of investmentproject
2. Evaluationof the efficiency of capital3. Mostefficient allocationof capital Knowledgeof capitaltheory
can help very much in taking investment decisions. This involves, capital budgeting, feasibility studies,
analysis of cost of capital etc.
7. Strategic planning:
Strategic planningprovides management with a framework on which long-term decisions can be made
which has animpact onthe behaviorof thefirm. The firm setscertain long-termgoalsandobjectives and
selects the strategies to achieve the same. Strategic planning is now a new addition to the scope of
managerial economics with the emergence of multinational corporations. The perspective of strategic
planning is global. It is in contrast to project planning which focuses on a specific project or activity. In
fact the integration of managerial economics and strategic planning has given rise to be new area of
study called corporate economics.
B. Environmental or External Issues:
An environmental issue in managerial economics refers to the general business environment in which
the firm operates. They refer to general economic, social and political atmosphere within which the firm
operates. A study of economic environment should include: a. The type of economic system in the
country. b. The general trends in production, employment, income, prices, saving and investment. c.
Trends in the working of financial institutions like banks, financial corporations,insurance companies d.
Magnitudeandtrendsinforeigntrade;e. Trendsin labourandcapitalmarkets;f.Government’seconomic
policies viz. industrialpolicy monetary policy, fiscal policy, price policy etc. The social environmentrefers
to social structure as well as social organization like trade unions, consumer’s co-operative etc. The
Political environment refers to the nature of state activity, chiefly states’ attitude towards private
business, political stability etc. The environmental issues highlight the social objective of a firm i.e.; the
firm owes a responsibility to the society. Private gains of the firm alone cannot be the goal. The
environmental or external issues relate managerial economics to macro-economic theory while
operationalissuesrelatethe scope tomicro economic theory. The scope of managerialeconomics is ever
widening with the dynamic role of big firms in a society.