This presentation will give an introduction, basics of Managerial Economics.

2. Economics: The Basics When wants exceed the resources available to satisfy them, there is scarcity Faced with scarcity, people must make choices Economics is the study of the choices people make to cope with scarcity Choosing more of one thing means having less of something else The opportunity cost of any action is the best alternative forgone 7 October 2011 Prof. Prasad Joshi

3. The study of the decisions of people and businesses and the interaction of those decisions in markets. The goal of microeconomics is to explain the prices and quantities of individual goods and services. Microeconomics 7 October 2011 Prof. Prasad Joshi

4. The study of the national economy and the global economy and the way that economic aggregates, grows and fluctuates. The goal of macroeconomics is to explain average prices and the total employment, income, and production. Macroeconomics 7 October 2011 Prof. Prasad Joshi

5. Production costs are as low as possible and consumers are as satisfied as possible with the combination of goods and services that is being produced. Economic efficiency 7 October 2011 Prof. Prasad Joshi

6. The increase in incomes and production per person. It results from the ongoing advance of technology, the accumulation of ever larger quantities of productive equipment and ever rising standards of education Economic growth 7 October 2011 Prof. Prasad Joshi

7. The absence of wide fluctuations in the economic growth rate, the level of employment, and average prices Economic stability 7 October 2011 Prof. Prasad Joshi

8. A mechanism that allocates scarce resources among alternative uses. This mechanism achieves five things: What, How, When, Where, Who Economy 7 October 2011 Prof. Prasad Joshi

9. Household - Any group of people living together as a decision-making unit. Every individual in the economy belongs to a household Firm - An organization that uses resources to produce goods and services. All producers are called firms, no matter how big they are or what they produce. Car makers, farmers, banks, and insurance companies are all firms Decision makers - Households, Firms, Governments 7 October 2011 Prof. Prasad Joshi

10. Government - A many-layered organization that sets laws and rules, operates a law-enforcement mechanism, taxes households and firms, and provides public goods and services such as national defense, public health, transportation, and education Market - Any arrangement that enables buyers and sellers to get information and to do business with each other 7 October 2011 Prof. Prasad Joshi

11. Land - Natural resources used to produce goods and services. The return to land is rent Labor - Time and effort that people devote to producing goods and services. The return to labour is wages Capital - All the equipment, buildings, tools and other manufactured goods used to produce other goods and services. The return to capital is interest Entrepreneurial ability - A special type of human resource that organizes the other three factors of production, makes business decisions, innovates, and bears business risk. Return to entrepreneurship is profit. 7 October 2011 Prof. Prasad Joshi Factors of Production

12. Gross domestic product - GDP is the total of all economic activity in one country, regardless of who owns the productive assets. For example, India’s GDP includes the profits of a foreign firm located in India even if they are remitted to the firm's parent company in another country. Gross national product - GNP, is the total of incomes earned by residents of a country, regardless of where the assets are located. For example, India’s GNP includes profits from Indian-owned businesses located in other countries. 7 October 2011 Prof. Prasad Joshi

13. 7 October 2011 Prof. Prasad Joshi Thank you!