UNIT-I

INTRODUCTION OF MANAGERIAL ECONOMICS

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MANAGERIAL ECONOMICS INTRODUCTION

INTRODUCTION OF MANAGERIAL ECONOMICS

Learning objectives : 1.Meaning of Economics. 2.Definition of Economics. 3.Characteristics of Economics 4.Scope of Economics.

INTRODUCTION OF MANAGERIAL ECONOMICS

What is economics ? Economics is a social science, which deals with the human behaviour in the life. Its basic function is to study how people -individuals,households,firms and nations maximize their limited resources and opportunities.

It teaches us the art of maximizing behaviour, more appropriately, optimizing behaviour.

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INTRODUCTION OF MANAGERIAL ECONOMICS

OVERVIEW OF MANAGERIAL ECONOMICS

Amartya Sen

Prof. Amartya Kumar Sen is one of the greatest intellectuals and economists of modern India. Amartya Sen is a philosopher, economist and a social thinker. At a time when the world was talking of globalization, liberalization and free market economy, Prof. Sen dared to differ. No wonder, he was awarded the Noble prize for welfare economics in the face of market oriented economics. Instead of the growth oriented economic path to prosperity, Amartya Sen has emphasized the need for giving a human face to development. Why Is He Famous? Amartya Kumar Sen is an economist best known for his work on famine, Human development theory, welfare economics, and the underlying causes of poverty and hunger. When the world was talking of free market economy, Prof. Sen emphasised the need for giving a human face to development. Amartya Sen is one of those few economists who talk of political economy of hunger. He received The Bank of Sweden Prize in Economic Sciences( Noble prize for economics), in memory of Alfred Nobel, for his work in mathematical economics in 1998. The government of India awarded him with the highest civilian award, the Bharat Ratna in 1999.

Jagdish Bhagwati

Jagdish Bhagwati is a renowned professor of economics and is regarded as one of the foremost international trade economist of modern times. Widely tipped as a future Nobel laureate, Prof Bhagwati enjoys immense reputation among his economist friends. Jagdish N. Bhagwati is presently University Professor at the Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations. Earlier, Prof Jagdish Bhagwati was Economic Policy Adviser to the Director General, GATT (1991-93) and also served as Special Adviser to the UN on Globalization and External Adviser to the Director General, WTO. Currently, he is a member of UN Secretary General Kofi Annan's High-level Advisory Group of the NEPAD (New Partnership for Africa's Development) process in Africa. He presents himself as the human face of global laissez-faire economics. Jagdish Bhagwati has written or edited over 40 books and hundreds of articles on economics. Some of his famous books are 'In Defense of Globalization' (2004), 'Free Trade Today' (2002), 'The Wind of the Hundred Days' (2000), 'A Stream of Windows' (1998), 'India in Transition' (1993), 'World Trading System at Risk' (1991), 'Protectionism' (1988), 'Economics & Politics' (founder-editor), 'The Journal of International Economics' (founder-editor) etc.

JAGDISH BHAGWATI

INTRODUCTION OF MANAGERIAL ECONOMICS

what is Optimization ?
Optimization is selecting the best out of available options with the objective of maximizing gains from the given resources.

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INTRODUCTION OF MANAGERIAL ECONOMICS

Modern business and managerial are complex.

A systematic knowledge and techniques of managerial economics is an absolute requirement of these days.
managerial economics provides the analytical framework and understanding of economic behaviour, logical thinking and useful techniques for decision making and highlights the role of managerial economist in decision making. managerial economics deals with the demand and supply of commodities, pricing methods, profit planning etc.
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MEANING OF MANAGERIAL ECONOMICS

1. Managerial economics is a specialized discipline of management studies which deals with the application of economic concepts, theories and tools of analysis for decision making process in business. 2. Economics is a science concerned with the problem of allocation of scarce resources, managerial economics is the application of economics to the problem of choice of scarce resources by the firms.
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DEFINITIONS OF MANAGERIAL ECONOMICS

Managerial economics is the integration of economic theory with the business practice for the purpose of facilitating decision making and forward planning by the management

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DEFINITIONS OF MANAGERIAL ECONOMICS

Managerial economics is the application of economic theory and methodology to business administration practice.

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DEFINITIONS OF MANAGERIAL ECONOMICS

Managerial economics is concerned with the application of economic concepts and economic analysis to the problems of formulating rational management decision

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DEFINITIONS OF MANAGERIAL ECONOMICS

Managerial economics is the science of directing scarce resources to manage cost effectively.

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CHARACTERISTICS OF MANAGERIAL ECONOMICS 1. 2. 3. 4. 5. 6. 7. 8. Micro economic in character It is Pragmatic(realistic) It is a part of normative science Conceptual and materials Makes use of macro economics Scientific Art Studies the theory of firm Tools in business administration

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CHARACTERISTICS OF MANAGERIAL ECONOMICS 1. Micro economic in character: -Primarily deals with the problem of individual business firms, And does not deal with the entire economy.

2. It is Pragmatic: -it considers the particular environment of firms in their day-to-day functioning and decision making.

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CHARACTERISTICS OF MANAGERIAL ECONOMICS

3. It is a part of normative science : It is prescriptive but not descriptive as it deals with future planning, policy making and how to make full use of economic principles in all these aspects. 4. Conceptual and material : managerial economics involves theory and measurement.These help in arriving at correct decisions

5. Makes use of macro economics: It makes use of some of the macro economic concepts which assist firm in forecasting and explain the general behaviour of the economy.
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CHARACTERISTICS OF MANAGERIAL ECONOMICS

6.Scientific art :It helps the management in the best and efficient utilization of scare resources .

7.Studies the theory of firm : it studies that body of economic concepts and principles concerning a firm which is known as theory of firm or economics of a firm.
8. Tools in business administration : Its theories, methods and techniques of analysis are used in the functional areas of business administration such as : Accounting,finance,marketing,personnel and production management.
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SCOPE OF MANAGERIAL ECONOMICS

The scope of a subject means area or the extent Of a particular subject. In that aspect, managerial economics includes the following:

1.Demand analysis

2.Production and cost analysis

3.Pricing

4.Profit management
5.Capital budgeting
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SCOPE OF MANAGERIAL ECONOMICS 1.Demand Analysis:

Demand analysis deals with demand determinants,demand distinctions,demand forecasting. Demand analysis also highlights the factors which influence the demand for a product.

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SCOPE OF MANAGERIAL ECONOMICS

2.Production and cost analyses : Production analysis studies the production function, factors of production, least cost combination, returns to scale etc. cost analysis deals with various types of costs and their role in decision making,determinants of costs,cost-output relationship in both the short-run and long run and cost control.
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SCOPE OF MANAGERIAL ECONOMICS

3.Pricing : pricing of the product or products produced by firms is a very important aspect of managerial economics since firms revenue mainly depends on its pricing policy. -the chief function of the firm is pricing. -pricing depends upon the cost of production. -pricing explains how prices are determined under different market conditions such as : Perfect competition Monopoly Duopoly Oligopoly Monopolistic competition
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SCOPE OF MANAGERIAL ECONOMICS 4. Profit Management: Profit management deals with the nature,functions and measurement of profit,profit policies,profit planning like break even analysis and control. - Success or failure of a firm is measured only in terms of profit.

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SCOPE OF MANAGERIAL ECONOMICS

5.Capital budgeting :
Capital management is done by means of capital budgeting. capital budgeting is concerned with the long term allocation of resouces.It deals with the analysis of:
1. Capital expenditure. 2.Demand for and supply of capital. 3.Cost of capital etc.

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