UNIT-1

Meaning, Nature and Scope of Economics

Meaning and Concept

The word economics has been derived from two Greek words; Oikos which means household

and Neimein which means management. Thus the literary meaning of economics is the study of

management of the household. Further it implies that economics is that domain of knowledge

which is concerned with the management of unlimited wants with limited resources by

household. The definition of economics has undergone perceptible changes. Broadly speaking,

the various definitions of economics can be listed under the following heads:-

(1) Wealth Definition(2) Welfare Definition(3) Scarcity Definition(4) Growth Definition

Wealth Definition:- This definition was given by Adam Smith in his book “An Inquiry

into the nature and causes of wealth of Nations” published in 1776.As the title of

book suggests that Adam Smith defines economics as the study of the nature and causes

of the generation of wealth of a nation. According to Adam Smith “Goods have both

value-in-use (utility) and value-in-exchange (price).He defined wealth as all the goods

which command value-in- exchange. He says that economics seeks to explain and

analyse the generation of wealth and also its distribution. In this definition Smith has

tried to explain the factors which are responsible for the generation of wealth. He argued

that the larger amount of wealth and betterment of the whole society could be achieved

by efficient allocation of resources through the market mechanism. In spite of all the

merits, the wealth definition has been criticized.

Criticism:-

(i) It has given all the emphasis on wealth and ignored man and his welfare.

(ii) Adam Smith has restricted the meaning of wealth as he included in wealth only

material goods like tea, biscuits, and butter etc. and excluded immaterial goods

like the services of the doctors, soldiers and teachers etc.

(iii) He gave the concept of economic man who satisfies his own interest without

having the social interests.

(iv) He says wealth as an end in itself but does not explain the means to achieve it.

Welfare Definition: - This definition was given Alfred Marshall in his book “Principles

of Economics” which was published in the year 1980.Marshall defines economics as

the science of welfare. In his definition the emphasis was shifted from wealth to man and

also from wealth to welfare. According to Marshall, “Economics is a study of man’s

actions in the ordinary business of life. It enquires how man gets his income and how he

spends it.” Thus it is on the one hand the study of wealth and on the other and most

important side, a part of the study of man. He pointed out that wealth is not an end in

itself but it is only a means to an end and the end is the promotion of human welfare.

Through welfare definition of Marshall, no doubt, is a great improvement over the wealth

definition of Adam Smith, it is also not free from the criticism.

Criticism

(i) Marshall’s view of economics is narrow and unscientific.

(ii) Material welfare can’t be measured by any scale and can’t be accepted as an end

of economics.

(iii) It included only material welfare and excluded non- material welfare.

(iv) Marshall offered normative view of economics. But economics is neutral

between ends and does not give value judgment.

Scarcity Definition: - This definition was given by Leonel Robbins. He defines

economics as a science of scarcity or choice in his famous book “An Essay on the

Nature and Significance of Economic Science” published in the year 1932.According

to Robbins, “Economics is the science which studies the human behavior as a relationship

between ends and scarce means which have alternative uses.”

This definition has the following fundamental features:-

(i) Unlimited Wants (ends)

(ii) Limited Means

(iii) Limited means have the alternative uses.

This definition is analytical rather than classificatory. It focused on a particular aspect of

behaviour, eg. Behavior concerned with the utilization of scarce resources to achieve unlimited

wants.

Criticism:-

(i) The concept of ends and means is not in conformity to human actions.

(ii) Knight has criticized that economics is only concerned with means and not ends. It should

discuss the alternative ends and not only means for a given end.

(iii) Robbins has reduced economics merely to the value theory. Theory of economic growth

now a day has become a very important branch of economics but Robbins’ definition does not

cover it.

(iv)Robertson has criticized this definition and says that this definition is too narrow and too

wide. It is too narrow because it excludes the concepts like- employment policy, relation

between capital and labour etc. It is too wide because the problem of resources allocation may

also arise in certain other fields not generally included within the scope of economics.

In spite of these drawbacks, scarcity definition is more scientific and analytical than the older

definitions and has greater degree of acceptability.

Growth Definition: - This definition was given by Paul A.Samuelson. Though Robbins’

definition is the most accepted one. Due to lack of practicability modern economist felt

that the better allocation and efficient use of means for economic growth should also be

the subject matter of economics. Thus the modern and modified definition of economics

can be explained in the language of Samuelson “Economics is the study of how men and

society choose, with or without the use of money, to employ scarce productive resources

which could have alternative uses, to produce commodities over time, and distribute them

for consumption now and in future among various people and groups of society.” This

definition is dynamic and incorporates both the problem of choice and problem of

development. The subject matter of economics has become so wide, so it is difficult to

define the economics in a nut shell. This definition is comprehensive and a suitable

definition involving wealth, welfare, choice of economic growth. We can conclude the

following points from the definition:-

(i) Economics is a science that studies those activities which are concerned with

the efficient consumption, production, exchange and distribution of scarce

means which have alternative uses.

(ii) The purpose of economics is to achieve maximum satisfaction of wants and

increasing of welfare as well as economic growth.

Nature of Economics

There is a difference of opinion among economists regarding the nature of economics. Some consider it as a science and some as an art. If economics is a science, then is it a positive or normative science?

A. Economics as a Science: - A science can be defined as systematized body of knowledge as certainable by observation and experimentations. It is a body of generalizations, principles, theories or laws which traces out a causal relationship between cause and effect. On the basis of this we can summarise for any discipline to be a science it must have the following characteristics:-(i) It must be systematized body of knowledge.(ii) It should have its own methodological apparatus.(iii) It should have its own laws and theories.(iv) The laws and theories can be tested by observation and experimentation.(v) Self – corrective.(vi) Universal validity.

Arguments in Favour of Economics as a Science

(i) Systematized body of knowledge: In economics there is a systematized collection, classification and analysis of economic facts. For example, economics is divided into consumption,production,exchanages,distribution and public finance which have their laws and theories on whose basis these departments are studied and analysed in a systematic manner.

(ii) Scientific Laws: - Laws of economics are similar to the laws of other science. There is a causal relationship between two or more phenomenon. As in physics the law of Newton states that there is an equal and opposite reaction to every action similarly in economics, the law of demand tells that other things remaining the same, fall in price leads to increase in demand and rise in price leads to decrease in demand.

(iii) Experiments: - As experiments are the part and parcel of science so in economics. Different economic laws have been experimented. In the case of economic experiment, there is no need of laboratory and we treat the whole social and national system as laboratory. For example to control inflation government applied various monetary and fiscal measures it is an economic experiment.

(iv) Universal: - The laws of economics have the universal validity like the laws of science. The law of diminishing returns, law of demand, law of diminishing marginal utility etc.are equally applicable in all countries.

(v) Self – corrective Nature: - Like science, economics is self corrective in nature. Under new facts and observations economists revise their theories in different fields of economics related to macroeconomics, monetary economics, international economics, public finance and economic development.

B. Economics as an Art: - Many economists considered economics as an art. Art is the practice of knowledge. Mere knowledge or developing theories become irrelevant without practical aspects. We can conclude that an art has the following features:-(1) Practice of knowledge.(2) Art teaches to do.(3) Art gives solution to the problem.(4) Art is practical.

Arguments in Favour of Economics as an Art

(i) Solution to the problem:- the various branches of economics provide practical solution to various economic problems. Economics solves the fundamental problems of an economy like allocation of scarce resources in satisfying the different wants.

(ii) Practical application: - The art is the practical application of knowledge. When we apply the economic law only then we come to know that whether

their results are true or false. Price determination guides the policy makers to manage supply and to maintain price stability. Role of advertisement in monopolistic market , all these theories are practically applicable in day to day life to make different decisions.

Economics: A positive science or a Normative Science

Positive Economics: - Positive statements are objective statements dealing with matters of fact or the question about how things actually are. Positive statements are made without obvious value – judgment and emotions. Positive economics can be described as what is, what was, and what probably will be. Positive statements are based on economic theory rather than emotion. Often these statements will be expressed in the form of a hypothesis that can be analyzed and evaluated.Examples:

A rise in interest rates will cause a rise in the exchange rate and an increase in the demand for imported products.

Lower taxes may lead to an increase in the active labour supply. A national minimum wage is likely to cause a

Concentration in the demand for low- skilled labour.

Normative Economics:- Normative statements are subjective- based on opinion only with or without a basis in fact or theory. They are more valuable statements that focus on “what ought to be”. It is important to be able to distinguish between these statements – particularly when heated arguments and debates are taking place.

The decision to grant autonomy to private banks is unwise and should be reversed.

A national minimum wage is totally undesirable as it does not help poor and causes higher unemployment and inflation.

The national minimum wage should be increased by 10% as a method of reducing poverty.

Protectionism is the only proper way to improve the living standards of workers whose employment is threatened by cheap imports.

Scope of economics

Stonier and Hague have divided the subject matter of economics into three categories which can be discussed as follows:-

Economic Theory: - it is theoretical part of economics. It contains economic theories and economic tools. It is divided into static and dynamic economics. It is also known as Economic Analysis.

Applied Economics: - It attempts to apply the results of economic analysis to descriptive economics. Industrial economics, managerial economics, and agricultural economics are some of the examples of applied economics.

Descriptive Economics: - In descriptive economics, relevant facts about a particular economic subject or topic are collected for the purpose of study. The subject ‘Indian Economics’ is the example of descriptive economics.

Scope of economics

We know economics as a branch of knowledge which deals with the allocation of scarce resources. The problem of resource allocation has been regularly faced by the individuals, enterprises, and nations over the years. In the field of economics in recent decades the use of mathematical tools and statistical methodology has become increasingly important. Further economics is not the study of choice making behavior only. Major national and international issues become the part of modern economic science. Currently the theory of economic growth has occupied an important place in the study of economics and it studies how the national income grows over the years.

Economics has two major branches:

(1) Microeconomics (2) Macroeconomics

(1)Microeconomics: It can be defined as that branch of economic analysis which studies the

economic behavior of the individual unit,may be a person, a household, a firm, or a n industry. It is a study of one particular unit rather than all the units combined together. An important tool used in microeconomics is that of Marginal Analysis. Some of the important laws and principles of microeconomics have been derived directly from the marginal analysis.The followings are the fields covered by microeconomics:

Theory of Consumer Behaviour and Demand Theory of Production and Costs Theory of Distribution or Factor pricing Theory of Economic Welfare

MACROECONOMICSMICROECONOMICS

FIGURE- SCOPE OF MICRO ECONOMICS

(2) Macroeconomics: Macroeconomics can be defined as that branch of economic analysis which studies the behaviour of not one particular unit, but of all the units combined together. Macroeconomics is a study of aggregates. It is the study of the economic system as a whole; national income, aggregate demand, aggregate supply, total consumption, total savings and total investment. The followings are the fields covered by macroeconomics:

Theory of Income, Output and Employment Theory of Business Cycles Theory of General Price level with theory of inflation and deflation Theory of Economic Growth Macro Theory of Distribution dealing with the relative shares of wages and

profits in the total national income Theory of National Income

MICRO ECONOMICS

Theory of Money

Difference between Microeconomics and Macroeconomics

Microeconomics Macroeconomics1 It is the study of economic actions of

individuals and small groups of individuals. It includes individual household, firm, industry, particular commodity and individual price. It deals with determination of price and output in individual markets.

It is the study of aggregate. It includes national income, national output ,aggregate demand, aggregate supply, general price level etc.

2 Its central problem is price determination of commodities and factors of production.

Its central problem is the determination of level of income and employment.

3 Its main tools are demand and supply of the commodity and factor.

Its main tools are aggregate demand and aggregate supply of the economy as a whole.

MACROECONOMICSTheory of national income Theory of employmentTheory of general price level & inflationTheory of economic growthTheory of International tradeMacro theory of distribution

4 Microeconomics is based on the partial equilibrium analysis which helps to explain the equilibrium conditions of an individual, a firm, an industry and a factor.

Macroeconomics is based on general equilibrium analysis which is an extensive study of a number of economic variables, their interrelations and interdependence for understanding the working of the economic system as a whole.

5 Its aims at optimum allocation of resources i.e. the objective of microeconomics on demand side is to maximize utility whereas on the supply side is to maximize the profits at the minimum cost.

Its aims at determination of aggregate output, national income, price level and employment level in the economy. The objectives include price stability, economic growth and balance of payment stability.

6 In microeconomics, the study of equilibrium conditions is analyzed at a particular period of time.

Macroeconomics is based on time lags, rates of change, and past and expected value of the variables in future.

Meaning of Science: The word science comes from the Latin “scientia”, meaning knowledge. Science refers to a system of acquiring knowledge. The term science also refers to the organized body of knowledge gained by using a system. In other words science may be described as any systematic field of study or the knowledge gained from it. It is a systematic enterprise of gathering knowledge about the nature and organizing and condensing that knowledge into testable laws and theories.

Scientific method is the standard for science. It includes the use of careful observation, experimentation, measurement, mathematics, and replication. The use of the scientific method to make new discoveries is called scientific research. Science as defined above is sometime called pure science to differentiate it from applied science, which is the application of research to human needs. Fields of science are commonly classified in the following two ways:

Natural sciences, the study of the natural world, and Social sciences, the systematic study of human behaviour and the society.

Meaning of Engineering: Engineering can be defined as the application of scientific and mathematical principles used for practical purpose like design, manufacture, and operation of efficient and economical structures, machines, processes, and systems.

Engineers apply the sciences of the physics and mathematics to find suitable solutions to problems. More than ever, engineers are now required to have knowledge of relevant sciences for their design projects; as a result, they keep on learning new material throughout their career. The crucial and unique task of the engineer is to identify, understand, and interpret the

constraints on a design in order to produce a successful result. It is usually not enough to build a technically successful product; it must also meet further requirements. Constraints may include available resources, physical, imaginative or technical limitations, and other factors as requirements for cost, safety, marketability, productibility, and serviceability. By understanding the constraints, engineers can fix the limit within which the production can be made.

Meaning of Technology: Technology word comes from the Greek word “techno logia” where techno means an art, skill, or craft and logia means the study of something, or the branch of knowledge of a discipline.

Technology can be broadly defined as the entities, both material and immaterial, created by the application of mental and physical effort in order to achieve some value. In this usage, technology refers to the tools and machines that may be used to solve real-world problems.

Types of Technology

In our daily life we can observe the following types of technology:

Labour intensive technology: The technology where more laour is used in comparison to capital to produce a unit of output. It is more appropriate for the underdeveloped countries where labour is in abundance and capital is in scarce.

Capital intensive technology: The technology where more capital is used in comparison to labour to produce a unit of output. It is more appropriate for the advanced countries, where capital is in abundance and labour is in scarce.

Neutral technology: It is neither labour saving nor capital saving. Intermediate technology: It is that technology which is midway

between capital intensive technology and labour intensive technology. For example, manufacturing a washing machine which works on electricity (when electricity is available) as also can be operated by hand (when electricity is not available).

The level of technology is an important determinant of economic development of a country. Development of economy though an ongoing process and dependent upon injections of new technology is subject to constraints of its capacity to generate and absorb the technological change. Technology leads to greater output, shorter working hours and creation of skilled jobs, production of newer and better goods of standardised quality and more efficient use of raw materials.

Role of Science, Engineering and Technology

Science, Engineering and Technology have significantly affected the human ability to control and adapt to their natural environments. They have affected the society in a number of ways. Some of them may be discussed as follows:

1. Economic Growth: With the advent of new technology emerging from science and better machines etc. developed by engineers both industrial and agricultural growth in an economy gains momentum even with the limited resources.

2. Increase in Production: The adoption of new and modern technology leads to greater increase in the output of the economies of the world.

3. Increase in Efficiency: Better equipments and techniques lead to growth in output without a proportional increase in input which means a rise in productivity and efficiency.

4. Better Infrastructure: all the economies of the world are investing in infrastructure for achieving the objective of economic development. Building up of good infrastructure is largely dependent on science and technology. Safety and other specifications of an infrastructure project are taken care of by the engineers.

5. Better Standard of living: People of the country and of the world in general now enjoy a better standard of living with new innovations which is making life more comfortable and enjoyable. Science, engineering and technology have added both comforts as well as luxuries to the life.

6. Faster Means of Communication: Telephones, mobiles and internet are the gifts of science and engineering to human beings which have made the world a global village and reduced communication barriers to facilitate business and personal life.

7. Global Competitiveness: The countries which are technologically sound and ahead in innovations are today the leading economies of the world. In the global era only those economies can be competitive which have adopted good science and technology policies and adopting the advanced technologies.

Engineering Economics

Meaning: Engineering economics is a part of economics for application to engineering projects. Engineers seek solutions to the problems and economic viability of each potential solution is normally considered along with the technical aspects.

Characteristics of Engineering Economics

1. Engineering economics is a traditional and important part of engineering practice.

2. Engineering economics is concerned with application of economic principles in technical and managerial decision making. The broad economic principles are:-(a) Effects of various costs.(b) Production lot size on cost.(c) Capital investment.(d) Rate of depreciation(e) Demand and supply including forecasting(f) Economies of scale

3. Engineering economics is both microeconomics and macroeconomics in nature when applied to engineering problems. For example, the study of demand analysis is mostly concerned with individual or household as a small unit of study. Whereas, the study of impact of taxes on raw-materials is a macro concept.

4. Engineering economics also includes certain concepts and principles from other fields such as statistics, accounting and management etc.

5. Engineering economics aids decision making aspects of an engineer and it avoids the abstract nature of economic theory.

6. Engineering economics is mostly an application tool, whereas economics is a social science with a broad characteristic.

7. Engineering economics provides an analytical and scientific approach resulting in qualitative decisions.

Scope of Managerial Economics in Engineering Perspective

The scope of managerial economics can be discussed under the following heads:

1. It has wide scope in manufacturing, construction, mining and other engineering industries. Examples of economic application are as follows:(i) Selection of location and site for a new plant.(ii) Production planning and control.(iii) Selection of equipment and their replacement analysis.(iv) Selection of a material handling system.

2. Better decision making on the part of engineers.3. Efficient use of resources results in better output and economic development.4. Cost of production can be reduced.5. Alternative courses of action using economic principles may result in reduction of prices

of goods and services.6. Elimination of waste can result in application of engineering economics.7. More capital will be made available for investment and growth.8. Improves the standard of living with the result of better products, more wages, and

salaries, more output etc. from the firm applying engineering economics.

Meaning of Managerial Economics

Managerial economics is a science which deals with the use of basic economic concepts, theories and analytical tools suitable in the decision- making process of a business firm.

In other words, managerial economics is a science which is concerned with those aspects of economic theory and its applications that are directly relevant to the managerial practice in the decision- making process of a business firm.

According to Milton H. Spencer and Louis Siegelman, “Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision- making and forward planning by management.”

According to Haynes, Mote and Paul, “Managerial economics is applied in decision making. It is a special branch of economics bridging the gap between abstract economic theory and managerial practice.”

Bryan Carsberg defines, “Managerial economics is the application of basic economic theory to the practical problems of a business firm.”

Nature of Managerial Economics

1. Pragmatic in nature: It is pragmatic in nature because it deals with making economic theory more application- oriented. Further managerial economics is concerned with the use of analytical tools of economic theory in solving practical managerial problems and improving decision- making in business.

2. Micro –economic in nature: Managerial economics is micro-economic in nature because it involves the application of the micro-economic concepts and theories. Microeconomics deals with the single units- single firm, single industry, single demand, price, and consumer and not with a whole. As it deals with the behaviour of small units including firm, industry so it is micro- economic in nature.

3. Normative in nature: Managerial economics is normative in nature because it not only deals with the different theories, principles, different dependent and independent variables but also prescribes what the firms should do in different situations keeping them in consideration. For e.g., economic theory can tell us the relationship between the price of a product and its quantity supplied but it doesn’t tell us whether the outcome of this relationship is good or bad. This is positive nature of economic theory but managerial economics on the other hand not only explains the impact of change in price on supply or vice versa but also suggests whether such course of action should be taken or not. Thus managerial economics is normative in nature which generally not only tells ‘what is’ but also tells us ‘what ought to be’, i.e. to suggest the best course of action.

4. Macro-economic in nature: Managerial Economics is macro-economic in nature because apart from studying the internal environment of a firm it also studies the external

environment of the firms. The firms have to analyse the economic environment such general price level, industrial relation, taxation policy of the governments, business cycles etc. in which they take decisions. Managerial economics helps the firms to cope up with the negative impact of the external environment.

5. Goal-oriented: Managerial Economics is goal-oriented in nature as it mainly aims at achieving maximum objectives of the business firms. The objectives of a firm include the objective of profit maximization, sales maximization, growth maximization, long run survival etc.

6. Application-oriented: managerial economics is an application-oriented science in the sense that it is concerned with economics applied in practical decision-making in business.

7. Tool in the different fields: managerial economics serves as a tool in the study of business administration especially in the functional areas such as finance, accounting, marketing, personnel management and production management.

Scope of Managerial Economics

The scope of managerial economics includes all those economic concepts, theories and analytical tools which can be used to analyse business environment and to find solutions for practical business problems. The scope of managerial economics covers two areas of decision making which are as follows:

1. Internal or Operational Issues

Operational decisions are those which the manager takes as his official role. These are concerned with the issues which arise in within the business firms and so they are under the control of management. These decisions are delegated or distributed in different hierarchy of the management. They deal with the general aspects as what to produce, how to produce, and for whom to produce. The internal or operational issues can further be divided under the following as the scope of managerial economics:-(i) Demand analysis and forecasting: Demand analysis is of great importance in

managerial economics. it seeks to identify and measure the factors that determine the demand for a product in the product market. The demand for a firm’s product reflects what the consumers actually buy. In every business firm, executive manager has to estimate current demand and forecast future demand for the output produced by the firm. Such demand decisions can be evaluated through an analysis of consumer behaviour. The important aspects dealt with under demand analysis are: individual and market demand; demand estimation; demand function; demand distinctions; demand forecasting and elasticity of demand and its relevance in decision- making in business. Demand forecasting attempts to estimate the likely demand for a product in future periods. If future demands are identified, production can be better planned.

(ii) Production analysis: Production analysis helps the firm to achieve the optimal levels in the production process. It helps to get maximum output with minimum level of inputs of a firm. The main concepts dealt under the production analysis are: production functions, returns to scale, isoquants, economies and diseconomies of scale.

(iii) Cost analysis: cost analysis plays an important role in decision-making of a business firm. It is discussed in monetary terms of the product produced in the business firm. The main aspects dealt with under cost analysis are: cost concepts, cost behaviour in the short run and long run, cost functions, cost determinants, cost control and cost reduction. Cost analysis especially deals with the various cost concepts and their practical usefulness in managerial decision-making.

(iv) Pricing analysis: pricing analysis is a core concept of managerial economics. It plays an important role in profit planning. The success of a firm depends upon correct price decisions taken by it. If the price is too high, the firm may not find enough consumers to buy its product. If the price is set too low, the firm may not be able to cover its costs. Thus, setting an appropriate price is important for every business firm. The pricing decision depends on the types of market. If the market is perfect competition, monopoly, monopolistic, oligopoly and duopoly etc, the firm takes the decision about fixation of price accordingly. The main aspects dealt with under pricing analysis are: concepts of market mechanism, price determination under different markets, pricing policies, pricing methods and approaches.

(v) Profit analysis: profit is the index of good performance of a business firm. Generally, firms aim at making profits. But the survival of every business firm depends upon its ability to earn profit. Hence, decisions concerning level of profit, rate of profit, reinvestment of profit, etc., are relevant in every business firm now a days. The main aspects covered under the profit analysis are: nature and measurement of profit, profit theories, profit policies, profit planning and control (break-even analysis) and profit forecasting.

(vi) Investment analysis: As the capital is scarce and expensive factor of production, issues related to the decision making about it are important. The major concerning issues related to capital investment are as follows:

Choice of source of funding The choice of investment project Evaluation of capital efficiency Most efficient allocation

(vii) Strategic or long term planning: Strategic or long term planning requires decisions to frame and to achieve the long term goals and objectives of a firm. Managerial economics helps a firm to come up with decisions related to the strategic planning and to achieve those strategic goals and objectives.

1. External or Environmental Issues

In managerial economics the external or environmental issues refer to the business environment of a firm in which it operates. These external or Environmental issues can be either political, social or economic within which the firm is operating. A study of these External or Environmental Issues include the study of:(i) Nature of the economic system existing in the country.(ii) Business cycle phases through which each firm has to undergo.(iii) Working pattern of the financial institutions like banks, insurance companies,

share market etc in the country.(iv) Trends in the foreign trade.(v) Trends in the labour and capital markets in the country.(vi) Policies of the government related to industries, monetary policy, fiscal policy

and pricing policy, etc.

Finally, we can conclude that external issues are dealt with the help of study of macro-economic aspects while the internal issues are dealt with the help of study of micro-economic aspects. The use of both micro-economic and macro-economic aspects for business decision making is provided by Managerial economics.