Introduction of economics
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R SManagerial economics analyzes how managers make economic decisions by studying microeconomics and its application to business. It helps answer questions about market structure, supply and demand conditions, costs, prices, output levels, and maintaining a competitive advantage. Managerial decisions include determining what and how to produce and who to target as customers. Economics principles like opportunity costs, incentives, and tradeoffs are important concepts for managerial decision making.
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Managerial EconomicsSubject MANAGERIAL ECONO.docx
Managerial Economics
?
Subject: MANAGERIAL ECONOMICS Credits: 4
SYLLABUS
Basics of Managerial Economics
Introduction to Economics, Basics of Managerial Economics, Introduction to Economics, Nature and Scope of
Managerial Economics, Managerial Economics & Economics Related Disciplines Interrelationship with Other
Subjects, Economics Tools
Demand Theory
Demand Analysis, Elasticity Concepts, Demand Forecasting, and Importance of Demand forecasting
Cost of Production:
Cost Analysis, Economic of Scale, Cost Reduction and Cost control, Capital Budgeting
Production Theory
Introduction to Production Concept, Production Analysis, Stage of Production, Return to Scale, Supply
Analysis
Market Analysis
Introduction to market Structure, Perfect Competition, Monopoly, Oligopoly and Pricing
Suggested Readings:
1. Managerial Economics – Analysis, Problems and Cases, P.L. Mehta, Sultan Chand Sons, New Delhi
2. Managerial Economics – Varshney and Maheshwari, Sultan Chand and Sons, New Delhi
3. Managerial Economics – D. Salvatore, McGraw Hill, New Delhi
4. Managerial Economics – Pearson and Lewis, Prentice Hall, New Delhi
5. Managerial Economics – G.S. Gupta, T M H, New Delhi
5
------------------------------------------------------------------------------------------------------------
NATURE AND SCOPE OF ECONOMIC ANALYSIS
------------------------------------------------------------------------------------------------------------
Structure
1.1 Introduction to Economics
1.2 Concept of Economics in Decision Making
1.3 Scope of Managerial Economics
1.4 Relationship between Managerial Economics and Other Subjects
1.5Tools and Techniques of Decision Making
1.6 Review Questions
------------------------------------------------------------------------------------------------------------
1.1 INTRODUCTION TO ECONOMICS
------------------------------------------------------------------------------------------------------------
This unit introduces you to the basic concepts of Economics. After going through this
unit you will come to know how Economics is helpful for Managers in their Decision
making process.
Objectives: • To analyze the concept of economics- scarcity and efficiency • Micro Economics and macro economics • Concept of managerial economics • How managerial economics differ from economics and its relationship with
management
Good morning students, the basic purpose of our studying of economics are the efficient
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alternatives available for efficient utilization of our scarce resources. The twin theme of
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Economics is the study of how society choo.
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Introduction of economics
- 2. • What is Economics. • What is Managerial economics. • Economics and Managerial Decision Making. • Review of Economic Terms. • Economic Rationality.
- 4. What is Economics ------ • Human wants are unlimited • Resources available to satisfy these wants are scarce / limited • People wants to maximize their gains • Economic agents / society have some economic problems because of scarcity of resources • They need to choose scarce resources among alternatives(scarce resources) based on choice and valuation of alternatives
- 5. Cont… Thus economics is the study of how economic agents or societies choose to use scarce productive resources that have alternative uses to satisfy wants (needs) which are unlimited and of varying degree of importance
- 12. What is Microeconomics ? • Study of economic phenomena at micro level i.e. individual and firm level • Microeconomics is the study of how individual firms or consumers do and/or should make economic decisions taking constraints into account.
- 13. Managerial Economics ? Managerial Economics is microeconomics applied to decisions made by business managers. The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
- 15. Economics and Managerial Decision Making • Relationship to other business disciplines – Marketing: Demand, Price Elasticity – Finance: Capital Budgeting, Break-Even Analysis, Opportunity Cost, Economic Value Added – Management Science: Linear Programming, Regression Analysis, Forecasting
- 16. Cont… • Relationship to other business disciplines – Strategy: Types of Competition, Structure- Conduct Performance Analysis – Managerial Accounting: Relevant Cost, Break-Even Analysis, Incremental Cost Analysis, Opportunity Cost
- 17. Economics and Managerial Decision Making • Questions that managers must answer: – What are the economic conditions in a particular market? • Market Structure? • Supply and Demand Conditions? • Technology? • Government Regulations? • International Dimensions? • Future Conditions? • Macroeconomic Factors?
- 18. Cont.. • Questions that managers must answer: – Should our firm be in this business? – If so, what price and output levels achieve our goals?
- 19. Cont….. • Questions that managers must answer: – How can we maintain a competitive advantage over period • Competitors? • Cost-leader? • Product Differentiation? • Market Niche? • Outsourcing, alliances, mergers, Acquisitions? • International Dimensions?
- 20. Cont… • Questions that managers must answer: – What are the risks involved? • Risk is the chance or possibility that actual future outcomes will differ from those expected today.
- 21. Managerial Decisions • What to produce • How to produce or how to choice technique of production • Who will use goods and services (target groups)
- 22. Ten Principles of Economics How People Make Decisions • Principle 1: People Face Trade-offs • Principle 2: The Cost of Something Is What You Give Up to Get It • Principle 3: Rational People Think at the Margin • Principle 4: People Respond to Incentives How People Interact • Principle 5: Trade Can Make Everyone Better Off • Principle 6: Markets Are Usually a Good Way to Organize Economic Activity • Principle 7: Governments Can Sometimes Improve Market Outcomes How the Economy as a Whole Works • Principle 8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services • Principle 9: Prices Rise When the Government Prints Too Much Money • Principle 10: Society Faces a Short-Run Trade-off between Inflation and Unemployment
- 23. Economic Models First Model: The Circular-Flow Diagram