Managerial EconomicsF.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 MICRO-ECONOMICS

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 macro-economics while micro-economics is concerned with individual economic behavior, macroeconomics deal with the entire economy. managerial economics is , essential is nothing but applied micro-economics. 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.

DETERMINATION OF OBJECTIVE

DEFINE THE PROBLEM

IDENTIFY POSSIBLE SOLUTION

SELECT THE BEST POSSIBLE SOLUTION

IMPLEMENT THE DECISION

DECISION MAKING PROCESS

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.