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Module -1
• What is economics?
• What is Managerial Economics?
• Economics and managerial decision making?
• Review of economic terms
• What is economics?
– Derived from Greek word “okios” which means
household.
– Human wants are unlimited.
– Resources available to satisfy these wants are
scarce/limited.
– People always want to maximize their gains.
• Economic problems
– Economic agents, either in individual level, group
or country level have some economic problems
because of scarcity of resources
– They need to choose scarce resources among
other alternatives based on choice and valuation
of alternatives
– There is a gap between the want and the
resources available that leads to the fact that
there are economic problems
10 “wants” 4 Resources
Priorities
4
“wants”
• What is Economics?
– From here the definition or the meaning of
economics comes that economics is the study of
how economic agents or society choose to use
scarce productive re sources that have alternative
uses to satisfy wants (needs) which are unlimited
and of varying degree of importance
– we can simply say that economics is the study of
scarcity and choice
• Micro economics
– The micro economics essentially deals with the fact
that how individual firm individual producer,
individual organizer; they should take their decision
they should make their economic decision taking
whatever the constant into account
• Managerial economics
– the study of how to direct scarce resource in the way,
that the most efficiently achieve a managerial goal
Marginal analysis
• Marginal analysis examines the effects of additions to
or subtraction from a current situation.
• Marginal analysis is concerned with finding out the
change in the total arising because of one additional
unit.
• Concept of marginal analysis deals with a unit increase
in cost/ revenue/utility.
• The change in the total revenue due to one additional
unit sold is known as Marginal Revenue.
• The change in total cost on account of one additional
unit produced is known as Marginal Cost.
• The change in total utility on account of one additional
unit utilized is known as Marginal Utility.
The change in the total revenue due to one additional unit
sold is known as Marginal Revenue.
Marginal Revenue = 𝑇𝑅– 𝑇𝑅𝑛−1
Where, 𝑇𝑅 is the total Revenue of n products
𝑇𝑅𝑛−1 is the total revenue of 𝑛 − 1 products.
2nd 78 38
3rd 113 35
4th 144 31
5th 170 26
6th 190 20
7th 203 13
8th 208 5
9th 204 -4
Thus we have,
Total utility
Marginal Utility
O Q
Diminishing marginal utility
Production Possibility Frontier
• Production possibility schedule is that
schedule which shows alternative production
possibilities of two sets of goods with the
given resources and technique of production.
• Production possibility curve is a graphic
presentation of two sets of goods with the
given resources and technique of production.
Production Possibility Curve
Goods A B C D E
Wheat ( lakh tones) 100 90 70 40 0
Cloth ( 1000 tones) 0 1 2 3 4
A
90 B
C
70
Wheat
D
40
E
1 2 3
Cloth