Managerial Economics: Introduction, Nature, Scope & Significance : Managerial Economics: Introduction, Nature, Scope & Significance Compiled and Presented by: Ms. Kumkum Bharti What do we mean by Economics? : What do we mean by Economics? . : . Definition 1: Dictionary defines economics as , the study of the production, consumption and transfer of wealth.
Definition2: Economics is about making choices in presence of scarcity.
Definition 3: Economics is a social science concerned with the allocation of scarce means in such a manner that consumer can maximize their satisfaction, producers can maximize their profits and the society can max. social welfare. Basic Terminologies : Basic Terminologies Production: conversion of inputs into outputs.
Consumption: using of goods and services for the satisfaction of wants.
Investment: using up goods(like tools & machinery) for further production.
Exchange: refers to the sale and purchase of goods and services.
Economic Activity: means the activity which is based on or related to the use of scarce resources for the satisfaction of the human wants. . : . Scarcity: Is a situation when demand for a good exceeds supply even at zero price.
Economic problem: a) Scarce resources;
b) Alternative uses Managerial Economics : Managerial Economics Meaning: M.E. is a study of economic theories, logic and tools of economic analysis that are used in the process of business decision making.
Economic theories and techniques of economic analysis are applied to analyze business problems, evaluate business options and opportunities with a view to arriving at an appropriate business decision. Importance of M.E. : Importance of M.E. Build analytical models
Attainment of goals
Formulation of business strategy
Indirect help to solve business problems
Give clarity and understanding to concepts and business environment. Scope of M.E. : Scope of M.E. Categorized in two
Operational or internal issues
Environmental or external issues Operational Issues : Operational Issues Theory of Demand
Theory of Production and Production decisions
Analysis of market- structure and Pricing Policy
Profit Analysis and Profit Management
Theory of capital and investment decisions Environmental Issues : Environmental Issues Issues related to macro- variables
Issues related to foreign trade
Issues related to government policies Theories of Managerial Economics : Theories of Managerial Economics Microeconomic Theories Theory of demand
Theory of production
Theory of price determination
Theory of profit & capital budgeting Macroeconomic Theories Theory of national income
Theory of economics growth and fluctuations
International trade and monetary mechanism Gap between theory and practice : Gap between theory and practice Real economic world is complex whereas, economic theories are simplistic.
Economic theories are hypothetical in nature but not far from reality. Assignment 1 : Assignment 1 How does the study of managerial economics help a business manager in decision making. Illustrate your answer with examples from production and pricing issues.
Write a note on nature and scope of managerial economics.
Submission Date: 10th Sept. 2009