Traditional Economics "Economics is the study of mankind in the ordinary business of life.

" Alfred Marshall "Economic is a social science concerned with allocation of scarce resources amon g competing ends." Lionel Robbins These definitions are now considered too restrictive and accordingly the subject has now been defined as a social science which covers the actions of individual s and groups of individuals in the process of producing, exchanging and consumin g of goods and services. Broadly speaking traditional economics can be divided into macro economics and m icro economics: Macroeconomics : it is concerned with the aggregate of individual economic decis ions. Keynesian theories, use aggregate demand to explain levels of unemploymen t and the business cycle ,were especially prevalent immediately after WWII. Microeconomics : it is concerned with the economic analysis of individuals ,firm s,and certain industries . Micro economics can be divided into further subfields as labor markets or welfare economics.

Managerial economics Need for managerial economics Businessman face many problems when they take up study of economics they find th e subject perplexing because economist have used certain technical terms to expl ain certain concepts which have unnecessarily complicated the fundamental princi ples. Even those economist who were engaged as consultants to business houses ha ve come to the conclusion that pure economic theory is not suited to their needs . They had never encountered any business problems in which their investigation was helped by any specific economic theorem. Empirical evidence, too has proved that the decision making process in business is at variance with the decision ma king process postulated in economic theory. In view of these facts ,therefore it is reasonable to expect that some suitable method of analysis should be develop or an altogether new type of theory propounded which may help us to understand the actual working of a firm. Economists, on the other hand, are of the opinion that businessman in general la ck an objective and scientific approach to economic problems. A business man thi nks too much in terms of symbols, such as initiative and enterprise, and substit utes opinion objective analysis. He adopts shortsighted and selfish tactics and id entifies the welfare of the economy as a whole with its own interest. The best a nalysis in the opinion of business man is one that starts by taking a position t hat favors him and then supported it with available data. Obviously this is dogm atic and contradictory to rational and scientific thinking. If we closely examine the above arguments and counter arguments, we will observe that some doubts of the economists are real and some are imaginary. In the same way some doubts of business man are valid and many others are based on falls pr emises. Managerial economics thus helps in creating a rapport between the business man a nd the economist by synthesizing economic theory and business practices to find a feasible solution for business problems. Thus Managerial economics is creates a vital link between the concepts of traditional economics and the models of dec ision making to create an different field of economics which is essential for fi rms to tackle their day to day challenges and.

Definition: "Price theory in the service of business executives is known as managerial econo mics." Professor Watson "Managerial Economics is a fundamental academic subject which seeks to understan d and to analyze the problems of business decision making." D.C. Haugue Managerial economics is the application of economic theory and methodology to bus iness administration practice. Eugene F. Brigham and James L.Pappas 1. It uses the tools and techniques of economics to analyze and solve business p roblems. It bridges the gap between traditional theory and business practices by fitting into the classification of business administration in two ways. First, it serves as a tool course wherein certain economic theories, methods and techniques of analysis are covered for their later use in the functional area. Second, it serves as an integrating course combining the various functional areas ands showing How they interact with one another as a form attempts to achieve its goods. 2. Managerial economics is not a part of economic theory but a separate branch b y itself; it presents a cumulative flow of analysis and synthesis in the form of integrated sets of concepts rather than a variety of divergent and haphazard vi ews. In addition to the knowledge inherited from economics, it has borrowed mate rial from other sciences and supplemented it with own observed facts and empiric al rules. In attaining a certain degree of maturity, it has created new methods of analysis. It is a discipline with its own principles and can be separated fro m other disciplines by consistent and clear cut definitions.

3. Managerial economics can also be broadly defined as the study of economic the ories, logic and tools of economic analysis that are used in the process of busi ness decision-making .Economic theories and techniques of economic analysis are applied to analyze business problems, evaluate business problems and opportuniti es with a view to arriving at an appropriate business decision. According to the above discussion, we can arrive to a conclusion that managerial economics integrates concepts and methods of many other branches of learning su ch as operations research, decision theory, statistics, mathematics, and macro e conomics and microeconomics. However the main source of its main source of inspi ration is micro economics. Micro economics and managerial economics Micro economics deals with problems of individuals, firms, and industries and is sometimes a partial equilibrium analysis. It is connected within only a part of economic organism, its interaction, determination and behavior. The economist p uts under the microscope to observe the details of its operation and develops th e theory about the determination of main quantities of the system, such as the p rice of a particular product, output of a specific commodity, revenue and expend iture of a given firm. Managerial economics makes use of numerous concepts of mi cro economics such as marginal cost, marginal revenue, demand theory etc. In developing a proper approach to decision sciences, managerial economics takes into account the traditional economic concepts of determinants of demand, behav ior of cost, measurement of profit , measurement of profit, pricing decisions an

d capital budgeting. Macro economics and Managerial economics It is also related to managerial economics, because it deals with the basic subdivision and aggregates of the entire economic system such as Gross national pro duct (GNP), General Price Index (GPI) and the level of employment etc., it serve s as a useful guide for devising business policies. The environment in which a business operates (the fluctuation ion national incom e, changes in fiscal and monetary measures and variations in the level of busine ss activities) it has relevance to business decisions. It is a study of the way in which forms act and react in response to change in tastes, habits, techniques and organizational structures. Statistics Statistics is a very useful science in business activities because business runs on estimates and probabilities. Statistics is used in business activities to de termine the demand for a particular product, analyze the impact of variations in taste, fashion, competition and purchasing power on the probable demand and the n proceed to adjust the output accordingly. If a person fails to do this he woul d either be erring on the side of over-stocking or under-stocking, both of which are harmful to his business interests. Statistics helps a firm to measure the a bove factors with reasonable degree of accuracy and a sure basis for decision ma king. Operational research Operational research deals with the complex problems arising out of management o f men, machines ,materials and money .The basic purpose of the approach is to de velop a scientific model of the system which may be utilize for policy making. O perational research is helpful to managerial economics in the field of product d evelopment, specification and acceptance of materials, inventory control, inspec tion and quality control, marketing and demand analysis .Tools of operational re search re linear programming dynamic programming, input output analysis, invento ry theory, probability theory, decision theory and symbolic logic Managerial economics thus bridges the gap between abstract theory and managerial practices, and thus utilizes those analytical tools that have proved their usef ulness in practice or are capable of improving business decisions in future .it narrows down the gap between problems of logic and the problems of policy-making . It also makes a departure from the mainstream of economic theory, much of whic h is too simple in assumptions but too complicated in applications.

Decision making Decision making has been the central theme of management sciences and managerial economics for more than half a century .but it was not until the late 50s that w e witnessed the emergence of sophisticated tools of mathematics and statistics w hich revitalized the subject. The bulk of literature on the subject covers many disciplines requiring more than a modest knowledge of psychology, sociology, mat hematics, statistics and economics. The decision theory is the outgrowth of the theory of consumers choice and has arisen out of utility maximization, indifferen

ce curves and behavior under risk and uncertainty. Hence most of the followers o f this school are economic theorists, and their approach is heavily oriented to model building. Managerial economics is concerned with decision making at the level of the firm .decisions have far reaching effects on the firm and are often not easy to make .in the circumstance, it is recommended that the systematic efforts are made to arrive at the right decisions .The following steps should be followed for the pu rpose: Managerial economics is intimately related to the theory of decision-making, for it concentrates on the multiplicity of goals and pervasiveness of uncertainty, both of which play a significant role in managerial decision-making. It deals ma inly with the economic rationale policy-making because economic decisions are co stly .management cannot ignore them, it has to think twice before it leaps thoug h it does not deal with decision process or with organizational group-making dec ision. Yet it takes into account the background environment and the total situat ion of decision-making which are usually ignore by the classical theory. Example 1(Vedanta group) Operating performance was strong, driven by record production in our Aluminium, Zinc and Iron Ore businesses and cost reduction measures. This helped us to miti gate the impact of a sharp fall in commodity prices in the second half (H2 FY 200 9) of the year ended 31 March 2009 (FY 2009). We also took proactive steps to tempo rarily shut down high cost operations at our MALCO aluminium smelter, Nkana copp er smelter at KCM and partially shut down the BALCO Plant I aluminium smelter. S urplus power has been sold in a power deficient state in order to maximise retur ns. Despite a tough business environment and a drop in commodities prices of our pro ducts, we continue to remain confident about the future based on our low-cost po sition and track record of low capital cost project development. This allows us to continue to deliver profits and growth even at depressed commo dity prices. We have made excellent progress during the year with our expansion programme. We commissioned a zinc concentrator at the Rampura Agucha mine, de-bo ttlenecked operations at our Chanderiya and Debari zinc smelters, achieved full capacity y at the first line of the 1.4 million tonne per annum (mtpa) Lanjigarh alumina re finery and progressively commissioned the first 250,000 tonne per annum (tpa) phas e of the new 500,000 tpa aluminium smelter at Jharsuguda. These were achieved in line with our expected capex plan at just over US$3 billion in FY 2009. With ve ry modest net debt, strong cash flow and significant non-recourse project financ e secured, our project expansion programme is well funded. We expect to commissi on most of our projects within budget and at, or ahead of schedule. Our ongoing and rigorous cost reduction measures, coupled with our fast response to the commodity cycle correction, has brought positive results in reducing ope rating costs in the third (Q3 FY 2009) and fourth (Q4 FY 2009) quarters of FY 2009, the benefits of which we expect will continue to be seen next year. Higher volum es and various improvements to enhance operational efficiencies have also reduce d unit operating costs. For instance, at our Copper Zambia operations we have achieved a sharp reduction in production costs from 292.8 US cents per lb in the first half (H1 FY 2009) of FY 2009 to approximately 140 US cents per lb in the month of March 2009. Our app roach to costs has always been to optimise productivity, increase efficiencies a nd achieve better recoveries, without sacrificing the longer-term growth potenti al of our operations. Our strong operational management teams are incentivised t o implement the innovative initiatives to enhance efficiency and achieve savings . Despite increased contribution from higher volumes and stable costs of productio n, EBITDA was US$1,612.2 million in FY 2009, including non-cash inventory write-

downs of US$79 million. Example 2(Bharti airtel) Becoming the world s fifth largest mobile operator, Sunil Mittal led Bharti Airt el has completed the acquisition of Zain Telecom s Africa operations for $10.7 b illion. The company has now 180 million subscribers in 18 Asian and African nations. Bharti group Chairman Sunil Mittal said the transaction is the largest ever cros s-border deal in an emerging market and will result in combined revenues of abou t $13 billion. He said Zain Africa would now be 100 per cent subsidiary of Bharti International . This deal would signal many new investments that would go to Africa, he added. At present, China Mobile is the world s largest mobile player with a subscriber base of 522 million, followed by Vodafone (348 million), Telefonica (206 million ) and American Movil (201 million). Africa strategy (Bharti airtel) Elaborating on Africa strategy, Bharti s international operations in-charge Mano j Kohli said the company had set a target of 100 million subscribers and $5 bill ion revenues by 2012-13. Bharti has acquired Zain Telecom s operations in 15 African nations, excluding S udan and Morocco. Zain has operations in 17 countries in the region and is claim ing to be the second largest operator after MTN. There were compromises to be made (in MTN). Zain is the second largest operator a nd that is the only difference. But we will have full control and our own brand. With this acquisition, we will have an unparalleled footprint in one of the faste st developing regions in the world. We are looking at more opportunities as we b uild more roll outs in Africa, he remarked. There is no extra payment made for the settlement. The company does not see any problem with another small shareholder Econet Wireless in Nigeria. For completing the deal, Bharti paid $7.9 billion and the balance $400 million f rom the total upfront payment would be done in a few days on completion of certa in formalities, Mr. Mittal said.

Conclusion Managerial economics, Thus , bridges the gap between abstract theory and manager ial practices, and utilizes those analytical tools that have proved their useful ness in practice or are capable of improving business decisions in future . It n arrows down the gap between the problems of logic and the problems of policy-mak ing , and gives executive access to their practical contributions that economic doctrines can make to policy-making .it also makes a departure from the mainstre am of economic theory, much of which is too simple in assumption but too complic ated in application.