introduction to managerial economics
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Introduction to Managerial EconomicsManagerial Economics is concerned with business efficiency
Economics Early DefinitionsAn enquiry into the Nature and Causes of Wealth of Nations Adam Smith Economics is that body of knowledge which relates to wealth F.A.Walker
Economics: Science of Scarcity or Science of ChoiceEconomics is the science which studies economic behavior as a relationship between ends and scarce means which have alternative uses RobbinsEconomics behavior is essentially the process of evaluating economic opportunities open to an individual or a society and given resources, making choice of the best of the opportunities.
Major Economic ProblemsWhat to produce?For whom to produce?Are the resources economically used?Maximum utilization of resources and men.Problem of growth.
Definition of Managerial EconomicsME is the use of economic modes of thought to analyze business situation. McNair and MeriamME .. Is the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management. Spencer and Siegelmam
Managerial Economics DefinedThe application of economic theory and the tools of decision science to examine how an organization can achieve its aims or objectives most efficiently.
Nature of Managerial EconomicsMicro EconomicsMacro Economics
Micro EconomicsThe word Micro means a millionth partWhen speaking of micro-economics or the micro approach, it means some small part or component of the whole economy that we are analyzing.Example: Individual consumer behavior, Price analysis of a particular firm, study of demand of individual product or firm.
Macro-Economics or the Theory of Income and Employment Macro Economics is the analysis of economic system as a whole.Example Aggregate output and aggregate expenditure
Circular Flow of Income or A Simple Model of an EconomyIn an economy there are two main decision makersHouseholds (Individual or consumers, society) Business firms
HouseholdsThese supply all the factors of production, viz., land, labour and capital, to the firms which constitute the production sector andThey consume all the goods and services produced by the business
Business firmsThese include all firms, farms, factories and shops engaged in production and distribution and goods and services performing two functions:They hire factors of production from the households and transform them into final goods and servicesThey supply all the goods and services to the households, the consumers
Interaction between the Households and FirmsThe sale and purchase of inputs creates factor market where the factor prices are determinedThe sale and purchase of final goods and services creates product market where product prices are determined
Concepts Positive vs Normative approachRisk and uncertainty Decision making and forward planningBusiness Environment
Positive vs Normative approachPositive approach concerns with what is, was or will be. This studies the phenomena as they actually are or as they actually happen.Example: as per the ministry of textiles figures, of the $13billion western style Indian apparel market urban as well rural ready to wear segment was just $2.5 billion, while tailors enjoyed a whopping 80% share worth $10.5billion.
A normative or regulatory science is a body of systematized knowledge relating to criteria of what ought to be and is concerned therefore with ideal as distinguished from actual. This involves value judgements on whether what happens is good or bad, desirable or undesirable. The retail sector has a huge scope to increase with special reference to ready to wear apparel industry to grow.
Characteristics of MEME is micro-economic in characterTakes the help of macro-economics It is prescriptive rather than descriptiveIt is both conceptual and metrical Used in decision making