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By
E.HARI PRASAD SHARMA
INTRODUCTION
Emergence of managerial economics as a separate course of
Defining Economics
Economics is a social science, which studies human behaviour in relation to optimizing allocation of available resources to achieve the given goals. Eg : individual household behaviour, firm, industry and nation Economics is also a study of choice-making behaviour of the people.
Managerial Economics
Managerial economics can be broadly defined as the study of
Douglas : Managerial economics is concerned with the application of economic principles and
management.
Characteristics
Micro Economics Economics of Firms Uses Macro-economics Analysis Managerial Economics is Pragmatic Managerial Economics is Normative Bridge between traditional economics and Business Management
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Nature
Arts or science?
Scope
Demand Analysis Cost Analysis Pricing Practices and Policies Profit Management Capital Management Analysis of Business Environment Allied Disciplines
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Managerial
Importance
Basis of Business Policies Predicting economic Quantities Estimating economics relationship Helpful in Understanding the External forces constituting the environment. Reconciling theoretical concepts of economics in relation to the actual business behavior and conditions.
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MICRO ECONOMICS
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. the analysis of the decisions made by individuals and groups, the factors that affect those decisions, and how those decisions effect others
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How to decide on new investments How to manage capital and profit How to manage inventory i.e. stock of both finished goods and raw material Most of the micro economic problems deals with most of
these questions.
The Law Demand The Theory of Production Analysis of Market Structure and Pricing Theory Profit analysis and management
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MACRO ECONOMICS
Study of the entire economy in terms of the total amount of goods and services produced, total income earned, level of employment of productive resources, and general behaviour of prices. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.
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Social factors viz., value system of the society, property rights, customs and habits etc., Political environment i.e., democratic, authoritarian, socialist political systems, or state attitude towards private business man etc.
These Environmental factors have a far-reaching bearing upon the functioning and performance of the firms. Therefore, decision makers have to take in to account the present and future economic, political and social Conditions in the country and give due consideration to the environmental factors in the process of decision making. Eg : SEZ in the Nandigram, Tatas small car in Anand in Gujarath State.
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Responsibilities of Managerial Economist To make reasonable profits on capital employed. Successful forecasts Knowledge of sources of Economic Information His status in the firm
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Fundamental Concepts
Opportunity cost Incremental Principle
Incremental Cost Incremental Revenue Business implication of Incremental Concept
Time Perspective
Series of order Discrimination
Role of a managerial economist in the firm Demand estimation and forecasting Preparation of business /sales forecasts Analysis of market survey to determine the nature and extent of competition Analyzing the issues and problems of concerned industry
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Demand forecasting
Investment decisions
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Queries??????
Thank - Q