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Managerial Economics

F.Y.B.M.S.

By-

GAURAV SINGH 205


AKHIL SUMAN 215
JUNAID SHIKH
181
KAIFI SHAIKH
182
SHAILESH SHARMA 188
MAHIPAL SHEKHAWAT 189
VIJAY RAWAL
251

WHAT IS ECONOMICS ?
Economics is the social science which deals with the
economic behavior of mankind. The word economics is
derive from two Greek words oikou and Namos means
the rule of the household.
Adam Smith the father of economics defined economics
as the study of wealth in his book wealth of the nation.
Alfred Marshall, the neo-classical economist considered
economics as science of welfare.
Lionel Robbins defines economics as economics is the
science which study human behavior as a relationship
between end and scars means which have alternative
uses.
Economics activities are carried out at individual level of
whole country therefore the subject matter of economics
is divided in to two parts namely Micro Economics and
Macro Economics . This were introduce by Prof.Ragnar
Frisch in 1993.

Micro economics
The term micro is derived from Greek word mikros which means small
or millionth part.
Micro-economics deals with an analysis of the behaviour of individual
economics units in entire economy in detail.
According to Prof. Kenneth Boulding, micro-economics is the study of
particular firm, particular households, individual prices, individual wages,
individual income, individual industries, etc.
According to Prof. Maurice Dobb, micro-economics is a microscopic
study of the economy. It deals with the working of markets for individual
commodities and the behavior of the individual consumer and products

SCOPE OF MICROECONOMICS

What is micro economics

FEATURES OF MICRO-ECONOMICS

Nature of Analysis
Method or Approach
Scope
Application
Nature of Assumptions

USES OF MICRO-ECONOMICS

Individual Economics Behavior


Economic Policies and Planning
Allocation of Resources
Working of a Free Enterprise Economy
Price Determination
Art of Economising
Centrally Planned Economy
Perfect Competition and Social Welfare
Public Finance

MACRO-ECONOMICS:
The term macro economics is derived from the Greek word
makros which means large.
Macro-economics deals with an analysis of large aggregates and their
averages in the economy as a whole rather than with particulars items in it.
It analyses the working of the whole economic system
According to Prof. K. E. Boulding macro-economics deals not only with
individual quantities as such but with the aggregates of these quantities;
not with individual difference but with the national income; not with the
individual price but with the price level; not with individual output but
with the national output.

DISTINCTION BETWEEN MICRO AND


MACRO ECONOMICS
Micro Economics

It is the study of individual


units like a particular firm, an
individual consumer, price of
one commodity, etc

Macro Economics

MANAGERIAL ECONOMY

Managerial economics is concerned with the application of economics


principal in business decision making . Business firms are confronted with
a number of situation which necessitate them to make choice . The choice
may be related to the nature of product to be produce, type to technology to
be used, advertising, pricing strategy, etc .
All business firms big or small have to make right choice and their choice
should result in optimum utilization of their scare resources.
Economics is basically concerned with allocation of scarce resources
which have alternatives to satisfy human wants which are unlimited.

MANAGERAL ECONOMICS AND


ECONOMICS:

Managerial economics uses economic principle in decision making.


Economics is broadly classified micro-economics and macroeconomics while micro-economics is concerned with individual
economic behavior, macroeconomics deal with the entire economy.
managerial economics is , essential is nothing but applied microeconomics. macroeconomics theory like demand, elesticity of
demand cost, production function etc are extensively used by
business firm for decision making. while managerial economics
reset on the edifice of micro-economics it is also influenced by
macro-economics. Business firm have to take notes of aggregates
like national income information rate of interest level of
employment government policy etc while in recent year due to
globalization macroeconomic environment place a significant role in
business decision making microeconomic theory related to inflation
business cycle aggregate demand etc business in decision making a
proper knowledge of economic principle what is micro and macro e

MANAGERIAL ECONOMICS AND


DECISION MAKING:
Apart from economic theory, business firms also depend on decision
science. Decision science involve various techniques like optimization
technique, statistical estimation, linear programming, game theory, for
casting method etc which are used to make the right choice from a number
of alternative. Thus managerial economics can be defined as the
application of economic theory and methods of decision sciences to arrive
at the optimal solution to the various business firms.

CENTRAL THEMES OF DECISION


MAKING:
Identifying the problems and opportunities.
Providing tools to analyse the alternative solution from which
choices can be made.
Selecting the best solution which will enable the firm to
realize its objective

PROCESS OF DECISION-MAKING
Business firms have to make a number of decision both in the short run and
long run. Decisions related to what to produce, where to produce what
technology should be used etc are very crucial to the survival of the firm in
the short run.
Decision related to enhancing capital investment, expanding market and
introduction of new product have to taken in long run.

DECISION MAKING PROCESS


DETERMINATION OF
OBJECTIVE
DEFINE THE PROBLEM
IDENTIFY POSSIBLE
SOLUTION
SELECT THE BEST
POSSIBLE SOLUTION
IMPLEMENT THE
DECISION

ROLE OF MANAGERIAL ECONOMICS:

Analysis of market condition.


Demand forecasting.
Project planning.
Formulation of investment policy, pricing policy etc.
Construction of models to solve the problems.
Guiding the firm in facing challenges and adapting to changes in the
domestic and global business environment.
Assisting the firms in its expansion plan.
Advising the firm about the impact of changes in fiscal policy, monetary
policy and trade policy.

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