Basics of managerial economics i.e nature and scope of ME for the students of management

1. N. Ramanjaneyulu,
Assistant professor,
Department of MBA,
ALTS - ANANTAPUR.

2. Learning Objectives:
 Managerial Economics
 Nature of managerial Economics
 Scope of managerial economics
 Managerial economics – Interdisciplinary

3. •Origin -Greek Word “Oikon and nomos”
• Meaning – Laws of household
• Definition- Deals with the individuals or group of
individuals with respect to
--procurement decision
-Exchanging
-Consumption

4. Classification of economics
Micro Economics
Economical study of small and individual units.
Ex: Individual income, price of product, etc.,
Macro economics
Economical study of large or aggregate units
Ex: National income, industry price etc.,

5. It is an integration of business practices and economic
principles for the purpose of facilitating managers to
take business decisions and forword planning

6. Objective
 Economics -------------- alternative use of scared
resources.
 Managerial economics ---- Optimization of business
decisions

7. • Close to micro economics
all the business decisions will be taken by analyzing
individual aspect.
• uses some of the concepts of macro economics
the limitations or boundaries to a decision can be
determined by using industrial policies, industry y pricing,
government policies etc.,
• Applied in nature
The concepts which are derived once can applied for similar
situations

8. Contd………
 Prescriptive nature
 Problem solving
it is used to solve business problems
• Assumptions and limitations
decisions can be taken by analyzing predictions

9. Managerial economics have wider scope in the business. Its
influence on the business decision include:
• Investment decision
•Demand decision
• production decision
• pricing decision
• make of buy decision
• economic forecasting and forward planning

10. Economic tools which are used to take
business decision:
Decision area Economic tool
Investment decision Capital budgeting techniques
Demand decision Law of demand, elasticity of demand,
demand forecasting etc.,
Production decision Production function, law of production
etc.,
Pricing decision Pricing policies, market structures etc.,
Profit related decision Profit management, CVP analysis etc.,
Make or buy decision Break even analysis
Economic forecasting and forward
Forecasting techniques
planning

11. Managers use the tools and techniques of different subjects or
areas in order to take business decisions by using managerial
economics. Thus managerial economics is considered as
interdisciplinary. The different areas include:
•Economics
•Mathematics
•Statistics
•Operation Research
•Accountancy
•Organization behavior etc.,

12. Relationship between Managerial
economics with other areas
Area Tool
Economics Micro economics, macro economics
Mathematics Algebra, calculus, exponential etc.,
Statistics Mean, standard deviation, correlation,
regression,etc
Operations research LPP, Game theory, network analysis,