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Managerial Economics

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14 views32 pages

Managerial Economics

Uploaded by

malik.ankita0007
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MANAGERIAL

ECONOMICS

B Y:
P R O F. M E G H A M AT H U R
IMM BUSINESS SCHOOL
2 valid questions:

1. What is the subject all about?


2. Why do we study the subject at all?
Definitions
of
Managerial Economics:

“We define managerial economics as the


integration of economic theory and
methodology with analytical tools for
applications to decision making about the
allocation of scarce resource in public and
private institution.” K. K. Seo & B.J. Winger
Note:

Analytic tool is used to analyze data and


extract actionable and commercially relevant
information that one can use to increase
results or performance.
Eg. R Programming. R is the leading
analytics tool in the industry and widely used
for statistics and data modeling.
Tableau Public
SAS
“It (managerial economics) is the study of
why some businesses prosper and grow, why
some simply survive and why others fail at
the market place and go under.” T. J. Coyne
Meaning of Managerial Economics:

Economics is concerned with the allocation


of scarce resources, having alternative
uses, among competing goals (or unlimited
ends). Managerial economics is slightly
specific in its approach. It studies the
economic aspects of managerial decision
making.
It provides the practicing manager with those
tools and techniques which are useful in
day-to-day decision making. Like traditional
economics, it is also concerned with choice
and allocation, in a narrow sphere though,
it examines how scarce re­sources are
allocated within a firm.
Points to ponder:

Basis Questions in Economics and


Managerial Economics:
1. What to PRODUCE? (Product/Service)
2. How to PRODUCE? (Technology)
3. For whom to Produce? (Customer)
Activity 2:
20 mins Decision making and 5 mins Discussion

1. Decide on a business of your choice.


2. Focus on the following Managerial
decisions:

 Scope of this business, [What to produce]


 City/Area to establish the business,
 Arrangement of funds (Debt : Equity)
 List of resources needed (minimum)
 Technology to be used (labor intensive or capital intensive),
[How to produce]
 Who will be the customers.[For whom to produce]
The two terms ‘managerial’ economics and
‘business’ economics are often used
interchangeably. But the scope of the former
is broader than that of the latter.
While the latter deals with the decision
making in profit making organizations, the
former provides methods and a point of view
that are also applicable in managing non-
profit organizations (like hospitals) and
public corporations (like the Indian Airlines
Corporation).
Managerial economics is a subset of
economics the includes select topics.
Managerial economics is more practice-
oriented. It draws significantly upon
behavioral economics, the theory of
organizations, operations research,
bounded rationality, experimental
economics and so on. Moreover,
managerial economics is more concerned
with microeconomics rather than macro-
economics.
Economics is divided into two
different categories:
Microeconomics and
Macroeconomics.

Micro economics is the study of


individuals and business decisions,
while Macro economics looks at
the decisions of countries and
governments.
Micro Economics

1. MICRO ECONOMICS STUDIES INDIVIDUALS AND BUSINESS


D E C I S I O N S.

2. M I C R O E C O N O M I C S F O C U S E S O N S U P P LY A N D D E M A N D ,
A N D O T H E R F O R C E S T H AT D E T E R M I N E P R I C E L E V E L S,
M A KI NG I T A B O TT O M - U P A P P R O A C H .

3. I T M O V E S F R O M I N D I V I D U A L T O M A N Y.
Microeconomics

Microeconomics focuses on supply and


demand and other forces that determine the
price levels in the economy. It takes what is
referred to as a bottom-up approach to
analyzing the economy.
 In other words, microeconomics tries to
understand human choices, decisions, and
the allocation of resources.
Micro Economics

It is the study of decisions made by people


and businesses regarding the allocation of
resources and prices of goods and
services. It also takes into account taxes,
regulations, and government legislation.
Micro Economics

M I C R O E C O N O M I C S E XA M I N E S H O W A C O M PA N Y
COULD MAXIMIZE ITS PRODUCTION AND
C A PA C I T Y S O T H AT I T C O U L D L O W E R P R I C E S A N D
B E TT E R C O M P E T E I N I T S I N D U S T RY.
Micro Economics
Key Principles

D E M A N D , S U P P LY, A N D E Q U I L I B R I U M :

P R I C E S A R E D E T E R M I N E D B Y T H E T H E O R Y O F S U P P LY
A N D D E M A N D . U N D E R T H I S T H E O R Y, S U P P L I E R S O F F E R
THE SAME PRICE DEMANDED BY CONSUMERS IN A
P E R F E C T LY C O M P E T I T I V E M A R K E T. T H I S C R E A T E S
ECONOMIC EQUILIBRIUM.
Demand and Supply Equilibrium

D S

P
E
R
I
C
E D

QUANTITY
Micro Economics
Key Principles

P R O D U C T I O N T H E O RY:

THIS PRINCIPLE IS THE STUDY OF HOW GOODS


A N D S E RV I C E S A R E C R E AT E D O R
M A N U FA C T U R E D .
WE WILL LEARN ABOUT PPC.
Micro Economics
Key Principles
Costs of Production: According to this
theory, the price of goods or services is
determined by the cost of the resources used
during production.
Land labor capital enterprise

Labor Economics: This principle looks at


workers and employers, and tries to
understand the pattern of wages,
employment, and income.
Macro Economics

M A C R O E C O N O M I C S TA K E S A T O P - D O W N A P P R O A C H A N D
L O O K S AT T H E E C O N O M Y A S A W H O L E , T R Y I N G T O
D E T E R M I N E I T S C O U R S E A N D N AT U R E .

INVESTORS CAN USE MICROECONOMICS IN THEIR


I N V E S T M E N T D E C I S I O N S, W H I L E M A C R O E C O N O M I C S I S A N
A N A LY T I C A L T O O L M A I N LY U S E D T O C R A F T E C O N O M I C A N D
F I S C A L P O L I C Y.
Macro Economics

It studies the behavior of a country and how


its policies affect the economy as a whole. It
analyzes entire industries and economies,
rather than individuals or specific companies,
which is why it's a top-down approach. It
tries to answer questions like "What should
the rate of inflation be?" or "What stimulates
economic growth?"
Macro Economics

Macroeconomics analyzes how an increase or


decrease in net exports affects a nation's
capital account, or how GDP would be
affected by the unemployment rate.

It is used by governments and their agencies


to construct economic and fiscal policy.
Investors of mutual funds or interest-rate-
sensitive securities should keep an eye on
monetary and fiscal policy.
Macro Economics
Relation of Managerial Economics to Other Areas
of Management:

Marketing and Sales:


Marketing and sales functions largely depend
on an analysis of consumer demand.
Marketing managers always try to evaluate
the size of the market for a new or existing
product.

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