Académique Documents
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Economics
Dr. Shylajan, C.S
Ph.D (MSE), PDF (IIM-C)
M:9440070524
Email: shylajan@ibsindia.org
Curriculum
Introduction to Economics
Demand and Supply Analysis
Consumer Behavior Analysis
Production and Cost Analysis
Market Structure
Pricing Practices
References
Microeconomics by ICFAI
Managerial Economics in
Global Economy by Domenick
Salvatore
Introduction to
Managerial Economics
What is the role of
Managers?
To Make Decisions
On What?
What to produce?
How to produce?
For whom to produce?
Whether to build a new plant?
Whether to close down a plant?
Whether to develop a new product?
What is the role of
Managers?
Firm has limited resources
Manager has to make a choice
Manager has to analyze Costs and
Benefits
What is the role of
Managers?
What is the anticipated objectives
of management?
Make Profit?
What is profit?
Revenue - Cost
What is the role of
Managers?
The firms Sales Revenue depends on
what?
Demand for its product?
Price of the product?
What is Demand?
What is the role of
Managers?
By minimizing Cost, firm can
maximize Profit
Manager should know the
MARKET STRUCTURE
Manager has to develop the
PRICING STRATEGY for his
products
Managerial Economics
focuses on
Identifying problems
Identifying opportunities
Analyzing alternatives
Making choice from alternatives that are
best from the standpoint of the firm
Overview
Scarcity and Economic problem
Economics
Production Possibilities
Opportunity Cost
Overview
Fundamental Economic Questions
Micro Economics
Market, Command and Mixed Economies
Role of Government
Summary
Scarcity and economic
problems
Source of any economic problem is
Scarcity of resources
For example,
Poverty
Unemployment
Inflation etc
Scarcity and economic
problems
We have
Limited Resources
But Unlimited Wants
Resources
Land
Labour
Capital
Entrepreneurship
Decision making
Unlimited wants
Scarce
Resources
Society makes choice
Economics
How to allocate scarce resource in
order to satisfy unlimited wants
It is about choice and decision-making
It is about efficient allocation of scarce
resource
We have to make a Choice
We can spend our limited resource to produce
Manufacture goods
Or
Agricultural
Society has to decide what to produce
Decision Making for
What?
To maximize social welfare
Consumer (maximize satisfaction/utility)
Firm (maximize profit)
Investor (maximize return on Invt)
Economy (achieve higher eco.growth)
By allocating scarce resources efficiently
Economic Efficiency
means
Optimal production of goods and
services
Maximum output with minimum
cost
Production Possibilities
We have limited resource
How do we allocate our resources to
produce manufactured goods and
Agricultural goods?
Production Possibilities
Output per
year
Production Possibilities
A B C D
Manufactured
goods
160 120 80 0
Agricultural
goods
0 40 80 160
What it shows?
We can produce more of one good
only by producing less of the
other good.
And every choice you make
has Opportunity Cost
What is the next best alternative
sacrificed due to this choice?
Then what is meant by
Opportunity Cost?
It is the best alternative sacrificed
for a chosen alternative
Opportunity Cost
What is the opportunity cost of
going to college?
It is the money you would have
earned if you worked instead.
Due to scarcity, every economic
agents face Fundamental
Economic Questions!
What to produce?
How to Produce?
For whom to produce?
What to produce?
Kind of goods and services
Agricultural goods, manufactured goods,
services?
Nature of goods-necessities or luxury
goods
Quantity in each category
How to Produce?
Techniques of production to be adopted
Labor intensive or capital intensive?
Decision depends on nature of economy
For whom to produce?
Produce only for those who have
ability to pay?
Health care services, for example
Micro Economics
Study of how a single
individual, household, firm
or industry choose to
allocate scarce resource in
order to satisfy unlimited
wants
Market Economy, Command
Economy and Mixed Economy
Market Economy
Market: A place or context in which buyers
and sellers buy and sell goods, services and
resources
Demand and Supply decide what to
produce, how to produce and for whom to
produce
Price gives the signal for producers and
consumers
Name some market economies?
Command Economy
State owns the means of production
(land, factories, financial institutions
etc)
Central planning authority takes
economic decisions like what to
produce, how to produce and for
whom to produce
Prices are determined by govt
authority
Command Economy
Central Planning authority allocates
resources for each sector
agriculture,
industry,
service sector
Name any command economy?
Mixed Economy
Both market economy and command
economy characteristics
Central planning authority takes
crucial economic decisions.
Market mechanism also plays an
important role
Name an example of mixed economy?
Role of Government in an
Economy
Produce
Distribute
Regulate
Role of Government in an
Economy
Provide certain public goods
such as law and order,
defense, Roads etc
Ensure equity through
taxation
Redistribute the resource to
the poor through subsidies
and welfare payments
Summary
Three fundamental economic
questions facing any economy
are..
Opportunity cost means.
The best option given up as a result
of choosing an alternative