Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Managerial economics 15


Published on

Managerial decision sciences

Published in: Economy & Finance
  • Login to see the comments

  • Be the first to like this

Managerial economics 15

  1. 1. 1
  2. 2. 2 Economics is the study of nature and uses of national wealth Father of Economics Adam Smith (1723-1790)
  3. 3. I. Ceteris Paribus- Other things remaining equal  It is a Latin word means ‘with other things (being) the same’ 3
  4. 4. II. Rationality  Implies that consumers and producers measure and compare costs and benefits before taking decisions  Consumers: Maximising utility and minimising sacrifice  Producers : Maximising profits and minimising costs 4
  5. 5. A. Micro(individual consumers and firms) Macro (Aggregates- Industry, not firm) B. Positive – The distribution of income in India is unequal. Normative – The distribution of income in India should be equal. 5
  6. 6. C. Time period  Short run -A time period not long enough for consumers and producers to adjust to a new situation-  Long run- Planning horizon- A time period long enough for consumers and producers to adjust to a new situation- All inputs can be varied- Whether to change product lines, build new plant etc. 6
  7. 7. “Application of economic theory and tools of analysis of decision science and forward planning to examine how an organization can achieve its objectives most efficiently” 7
  8. 8. 8 Utilization of minimum resources Earn maximum profit Resources Demand for Resources
  9. 9. 9 Economics – Theory & Methodology Business Management – Decision Problems Managerial Economics – Application of economics to solve business problems
  10. 10.  Microeconomics  Pragmatic  Macroeconomics  Aims at helping the management  A scientific art  Prescriptive rather than descriptive 10
  11. 11.  Theory of demand  Demand Analysis  Demand Theory  Theory of production  Variable factor of production  Fixed factor of production  Theory of price  Theory of profit 11  Theory of capital and investment  Environmental issues  Business cycles  Industrial policy of the country  Trade and fiscal policy of the country  Taxation policy of the country  Price and labour policy
  12. 12. Define the problem Determine the objective Identify possible solutions Select the best possible solution Implement the decision 12 5 Stage Model of Decision Making Process
  13. 13. o Use of Statistical Techniques o Time Series: For Demand forecasting o Regression: Two or multiple variables used to study interrelationships, estimation and prediction o Measures of central tendency and variation 13
  14. 14. What is the role of Economics in Business? Costs, prices, output, compensation, strategic behaviour and ethics making. The Big Picture- Whose job is this? Economic theory forms management areas such as accounts, finance, marketing, systems and operations. 14
  15. 15. Role Of Managerial Economist: To decide  What to produce?  Where?  How ?  How much?  Allocation of resources  For whom to produce?  Which price to sell? 15
  16. 16. Plan and control business operations-  Cost minimisation  Profit maximisation ??  Managing competition  Economic intelligence  Market research 16
  17. 17.  The principles of managerial economics are integral to the decision making process within business.  Managerial economics provides information on consumers, prices, costs, quantities, competition and business strategy.  A major contribution of managerial economics is the estimation of risk. 17
  18. 18. Thank you