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Managerial Economics

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Managerial Economics Prof. Rama Deshmukh What is Management ? Duties ,functions and role of manager What is Economics? Definition of Managerial Economics Relationship ... – PowerPoint PPT presentation

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Title: Managerial Economics


1
Managerial Economics
  • Prof. Rama Deshmukh

2
  • What is Management ?
  • Duties ,functions and role of manager
  • What is Economics?
  • Definition of Managerial Economics
  • Relationship to Economic Theory
  • Relationship to decision science
  • Business environment and managerial economics
  • Scope of Managerial economics

3
What is management
  • Evolution and present scenario

4
  • Modern business world is characterized by
    dynamism ,computerization,
  • Economies are no longer self-sufficient,
    inward-looking added is the pressure of severe
    competition due to globalization.
  • Darwins principle applies even today nay more
    strongly.
  • Big corporates follow military strategies
    involving surprise, security and unity of
    command.
  • Business units aim at a variety of goals /
    objectives.
  • Problem of economizing and choice are most
    important for firms.

5
  • Decision-making is a must at every stage.
  • Survival amidst uncertainties is no doubt
    challenging. Managerial Economics helps them to
    plan and implement decisions in such a complex
    and dynamic atmosphere.
  • Business Economics or Economics of firms
    provides managers with different tools.
    techniques and principles enabling them make
    optimum use of resources within constraints.

6
The term Managerial Economics involves 2 terms
former refers to acts and decisions of manager
later to a subject matter.
  • What is management ?

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13
  • What is economics ?

14
What is Economics ?
  • It is a science of earning and spending wealth
    as defined by the Father of Economics Adam Smith
    in his classic work An enquiry into nature and
    causes of the Wealth of Nations.
  • In the opinion of Alfred Marshall it was study of
    mankind in ordinary business of life.
  • Lionel Robbins gave us the most accepted
    scarcity-oriented definition of Economics. He
    says Economics is a social science which studies
    human behavior as a relationship between
    unlimited wants and scarce means which have
    alternative uses.

15
Economic problem choice--
16
Definition of Managerial Economics
  • According to Mansfield ,managerial economics is
    applied microeconomics.
  • Whether profit or non-profit making
    organisations and whatever may be their goals ,
    they have all to face constraints which may be
    internal /or external.
  • THE BASIC DECISION-MAKING PROCESS IS SAME FOR ALL
    FIRMS.
  • All managerial decision problems are solved with
    the help of tools ,concepts and principles in.a)
    Economic theory b) Managerial economics c)
    Mathematical economics.
  • Role of economic theory----
  • In any business, the businessman has to
    decide what , how ,when ,how much , whom ,
    where etc.

17
There arises question of choice at every stage of
production. eg. Choice regarding selection of
project, location of plant ,inputs , funds etc.
  • The manager has to study environment at Micro as
    well as Macro levels.
  • Micro economics here the subject-matter is
    individual consumer ,firm market , industry etc.
    Theories under micro-economics are Theory of
    value, theory of distribution, theory of economic
    welfare etc.
  • Macro-economic environment is general
    eco-pol-social condition of the larger system
    which may be at domestic /or international
    level.

18
Role of mathematical economics and
econometrics----
  • Mathematical economics is used to formalize
    economic laws. Eg. Law of demand can be expressed
    mathematically as Q 25 -3 (p) here demand is
    dependent variable and price independent variable
    moreover demand is inversely related to price.
  • Econometrics is application of statistics to
    real world. Empirically collected data can be
    applied to equations to find solution. eg.
  • Q f (Y, Px , Py , W , U , T ,E ----- )
  • Trends revealed by forecasting help a firm take
    optimal decisions.

19
Business environment and managerial economics--
  • Business environment refers to all those forces
    which influence functioning of business.
  • Two types of factors are relevant
    here-1)Internal factors these are controllable
    either altered or modified. 2) External
    factors- these are beyond control
  • Example of internal factors corporate
    philosophy, physical assets , management
    structure, human resources , R D , FINANCE ,
    technology etc.
  • Example of external factors Customers ,
    suppliers , competitors , natural factors
    ,demographic changes , political situation ,
    eco-social condition , government policies etc.

20
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