Scribd
Upload
2 views

Chapter 1

Economics is the study of resource allocation by individuals, businesses, and governments, divided into Microeconomics, which focuses on individual units, and Macroeconomics, which examines the overall economy. Managerial Economics applies economic theories to business decision-making, emphasizing demand analysis, production costs, and pricing strategies. The document outlines the differences between Micro and Macro Economics, highlighting their focus, scope, and relevance in business contexts.

Uploaded by

provideosma62
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
2 views

Chapter 1

Economics is the study of resource allocation by individuals, businesses, and governments, divided into Microeconomics, which focuses on individual units, and Macroeconomics, which examines the overall economy. Managerial Economics applies economic theories to business decision-making, emphasizing demand analysis, production costs, and pricing strategies. The document outlines the differences between Micro and Macro Economics, highlighting their focus, scope, and relevance in business contexts.

Uploaded by

provideosma62
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

Definition of Economics:

Economics studies how individuals, businesses, and governments allocate scarce


resources to satisfy their needs and wants. It is divided into two main branches:
which focus on individual and firm-level decisions, and Macroeconomics, which
looks at the overall economy, including inflation, unemployment, and growth.

Nature of Economics:
1. Science and Art
2. Positive and Normative
3. Micro and Macro
4. Scarcity and Choice
5. Wealth and Welfare
6. Social Science
7. Dynamic Nature
8. Interdisciplinary
Microeconomics: The study of individual economic units such as households,
consumers, firms, and markets.
Definition: Microeconomics is the branch of economics that studies the behaviour
and decision-making of individual economic units, to understand how they
interact with each other and the larger economy.
o Focus Areas:
 Consumer behaviour and demand
 Production and cost functions
 Market structures (perfect competition, monopoly, oligopoly)
 Price determination
o Application in Managerial Economics:
 Analyzing demand and supply
 Cost management
 Pricing strategies

Features:
1. Individual Decision-Making
2. Supply and Demand Analysis
3. Price Mechanism
4. Elasticity
5. Market Structures
6. Marginal Analysis
7. Consumer Theory
8. Production and Costs
Macroeconomics is the study of the economy as a whole, focusing on aggregate
variables such as inflation, unemployment, and economic growth. It examines the
overall performance of the economy and the factors that influence it.
Definition: Macroeconomics is the branch of economics that studies the
behaviour and performance of the economy as a whole, to understand the factors
that influence economic growth, inflation, and unemployment.
o Focus Areas:
 National income and expenditure
 Monetary and fiscal policies
 Economic growth and cycles
 Inflation and deflation
 Unemployment and labor market
 Economic growth and development

o Application in Managerial Economics:


 Understanding economic policies and their impact on business
 Analyzing macroeconomic indicators for strategic planning
 Assessing global economic trends and risks

Features:
1. Aggregate Indicators
2. Economic Growth
3. Business Cycles
4. Monetary Policy
5. Fiscal Policy
6. International Trade and Finance
7. Inflation and Deflation
8. Unemployment

Difference between Micro Economics and Macro Economics


Aspect Microeconomics Macroeconomics
Focus Individual (Price and Economy-wide
Output in specific (National output,
markets) inflation, and growth)
Scope Narrow (Individual Broad (Economy-wide
units (firms, phenomena)
consumers))
Units of Analysis Firms/Consumers Aggregate Variables
Decision-Making Firm/Individual Government/Economy
(relevance) (short-term decision- (Long-term planning
making) and policy)
Market Structure Various Overall
Price Determination Market Prices General Price Levels
Economic Growth Not Primary Central
Unemployment Not Direct Central
Inflation Not Direct Central
Government Role Limited Significant
Policy Tools Business Strategies Fiscal/Monetary
Economic Fluctuation Not central Business Cycles
Resources Allocation Firm-Level Economy-Wide
Income Distribution Individual/Household National
Trade and Global Limited Extensive
Factors
Key Variables Demand, supply, cost, GDP, inflation,
revenue unemployment
Managerial Economics and its Relevance in Business Decisions:
Definition: Managerial Economics is the branch of economics that applies
economic theories, principles, and methodologies to managerial decision-making
in business. It focuses on using economic analysis to solve problems, optimise
resources, and make informed decisions that align with organisational objectives.
It bridges the gap between abstract economic theory and practical business
decision by providing managers with a systematic framework for analyzing
problems and finding optimal solutions.
Here is a detailed exploration of managerial economics and its relevance to
business decisions.
1. Demand Analysis and Forecasting
2. Production and Cost Analysis
3. Pricing Strategies
4. Market Structure and Competition
5. Profit Maximization
6. Risk and Uncertainty Management
7. Capital Budgeting and Investment Decisions
Relevance in the Modern Business Environment

Fundamental Principles of Managerial Economics:


Incremental Principle
Marginal Principle
Opportunity Cost Principle
Discounting Principle
Concept of the Perspective
Equi- Marginal Principle
Utility Analysis
Cardinal Utility
Ordinal Utility

You might also like