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Prepared by :

Dr. K. BARANIDHARAN
PROF.MBA
SRI SAIRAM INSTITUTE OF TECHNOLOGY
CHENNAI

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Engineering
Economics& Financial
Accountingment
3 30 July 2014
MAIN AREA OF M E, 1.DEMAND
DECISION
THe Forecasting Of Demand For A Given
Product And Service Is The First Task Of
The ME.
The behavioral implication such as the
customer response to given changes of
price and supply.
The changes of income levels of customer
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2.INPUT-OUTPUT DECISION
The cost of inputs in relation
to output are studied to
optimise profits.
Production and cost function
are estimated to certain
parameters,
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3.PRICE-OUTPUT DECISION
The Production Is Ready And
The Task Is Determine The
Price In Different Market
Situation Such As Perfect
And Imperfect Markets
Ranging From Monopoly.
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4.PROFIT - RELATED DECISION
The technique such as
Break Even Analysis, cost
reduction and control
and ratio analysis to
ascertain the level of
profit.
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5.INVESTMENT DECISION
Investment decision are also
called capital budgeting
decisions.
Involve the large fund
commitment, which
determine the fate of the firm.

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6.ECONOMIC FORECASTING AND
FORWARD PLANNING
The economic forecasting leads to the forward
planning.
The firm operate environment which is dominated
by the INTERNAL AND EXTERNAL factors.
EXTERNAL: govt policy, competitation, employment,
labour, human resources, finance, marketing..
INTERNAL: policies, procedures relating to the
finance, people, market and products.
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M E related with OTHER
DISCIPLINES
Managerial Economics and Traditional
Economics:
Economics and Managerial economics
both are facing identical
problems,i.e., problem of scarcity and
resource allocation.
Since labour and capital are always
limited it must find way for effective
utilizing of these resources.
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ITS MAIN CONTRIBUTION TO ME

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HELP IN UNDERSTANDING THE MARKET
CONDITIONS AND THE GENERAL
ECONOMIC ENVIRONMENTWITHIN
WHICH THE FIRM OPERATES.
TO PROVIDE THE PHILOSOPHY FOR
UNDERSTANDING AND ANALYSING THE
RESOURCE ALLOCATION PROBLEMS
1. M E OPERATIONS RESEARCH

Both operations research and managerial
economics are concerned with taking effective
decisions,
Decision making is the main focus in OR and ME.
To understand and to analyse the problems of
business decision making while OR is an activity
carried out by functional specialist within the firm
to help the manager to do his job of solving
decision problems.
It refers to both minimisation of costs and
maximisation of revenue
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ITS MAIN CONTRIBUTION TO
MANAGERIAL ECONOMICS
OR models like queuing, linear
programming etc.., are widely used
in managerial economics
Model building, economic models
are more general and confined to
broad economic decision making
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2.M ECONOMICS AND MATHEMATICS
Mathematics is closely related to
managerial because managerial
economics ,being conceptual but
also metrical.
Its metrical property is used to
estimate and predict the relevant
economic factors for decision
making and forward planning
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ITS MAIN CONTRIBUTION TO
MANAGERIAL ECONOMICS
Geometry, algebra and calculus
Logarithms and exponential, vectors
and determinants, input-output
tables etc.,
Even OR can be included as a part of
mathematical exercise
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3. ME AND STATISTICS
Statistics is widely used in managerial
economics. It is mainly needed for a
correct judgement
and decision making
ITS MAIN CONTRIBUTION TO
MANAGERIAL ECONOMICS
To handle the unforeseen circumstances
the theory probability is mainly used.
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4.ME AND THE THEORY OF DECISION

The theory of decision making is
relatively a new subject that has
significance for managerial economics.
Much of economic theory is based on the
single goal MAXIMISATION OF PROFIT,
but theory of decision making recognizes
the multiplicity of goals and the
pervasiveness of uncertainty
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5.ROLE OF ME IN BUSINESS

The task of organizing and
processing information and then
making an intelligent decision
based upon two general forms
Task of making Specific decisions
Task of making General decisions
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Task of making Specific decisions

Production scheduling
Demand forecasting
Market research
Economic analysis of the industry
Investment appraisal
Security management appraisal
Advice on trade
Advice on foreign exchange management
Pricing and related decisions
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Task of making General decisions
Analysing the general
economic condition of the
economy
Analyzing the demand for the
product
Analysing the general market
condition of the economy
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6.ACCOUNTANCY
Accountant provides accounting
information relating to Cost,
Revenues, Receivables,
Payables, Profit/Losses. In the
data performance of the firm
result.
Decision making and forward
planning.
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7.PSYCHOLOGY
CONSUMER PSYCHOLOGY is the
basis on which a ME acts.
The customer react the change
the price or supply and it is effect
of demand/profits is the main
focus study of ME.
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8.ORGANISATIONAL BEHAVIOUR
The study develop
behavioural model of firm
integrating the managers
behaviour with that of the
owner.
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