Managerial Economics


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Chapter – 1 : 

Chapter – 1 The Nature and Scope of Managerial Economics

Important Definitions: 

Important Definitions 2


Business Business or managerial activities include all the activities connected with production, trade, banking, insurance, finance, advertising and numerous other related activities. 3


Economics Economics is a science of management of limited resources with unlimited wants of human beings. It is concerned with the problem of allocation of scarce resources among alternative uses. 4

Slide 5: 

Management decision problems Economic Theory : Microeconomics, Macroeconomics Decision Sciences : Mathematical economics, Econometrics Managerial Economics: Application of economic theory and decision science tools to solve m anagerial decision problems OPTIMAL SOLUTION TO MANAGERIAL DECISION PROBLEMS 5

Management Decision Problems: 

Management Decision Problems Product price and output Make or buy Production Technique Internal Strategy Advertising Media and intensity Investment and Financing 6

Economic Concepts (framework for decisions): 

Economic Concepts (framework for decisions) Theory of consumer behaviour Theory of the firm Theory of market structure and pricing 7

Decision Sciences (Tools & techniques of analysis): 

Decision Sciences (Tools & techniques of analysis) Numerical Analysis Statistical Analysis Forecasting Game Theory Optimization 8

Managerial Economics: 

Managerial Economics Refers to the application of economic theory and the tools of analysis of decision science to examine how an organization achieve its aim or objectives most efficiently. Optimal solution to managerial decision problems 9

Characteristics of ME: 

Characteristics of ME Mainly microeconomics Takes help of macroeconomics Pragmatic Normative Multi – disciplinary Conceptual and material Wise choices 10

Role of Managerial Economics: 

Role of Managerial Economics Production scheduling Demand forecasting Market research Economic analysis of the Industry Investment appraisal Economic analysis of competing companies Pricing & related decisions Advice on trade & public relations 11

Role of Managerial Economics Contd……: 

Role of Managerial Economics Contd …… Analysis and forecasting environmental factors Advice on the purchase of raw materials and inventory building Market survey to determine the nature and extent of competition 12

Role of Managerial Economist: 

Role of Managerial Economist Better management of resources Forecasting Additional information To maximize profit Conceptual as well as practical Researcher Thinking, discussing & critisiging Taking up challenging tasks 13

Essential Qualifications of a Managerial Economist: 

Essential Qualifications of a Managerial Economist Diplomacy Through knowledge of the working of the firm Intuitive ability Modest, firm and discreet Creative mind Conceptual and materialistic 14