INTRODUCTION TO MANAGERIAL ECONOMICS

C.M.JOSHI

Learning objectives

To understand the nature and the scope of Managerial Economics How do managers make their decisions?

Agenda

MEANING OF ECONOMICS

Meaning of Economics

Economics studies how societies produce, distribute and consume material goods and services in face of scarce resources. The problem of scarcity arises due to the mismatch between human wants and available resources.
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3 Central Problems Faced by a Society

What and how much to produce? How to produce? For whom to produce?

TYPES OF RESOURCES

CAPITAL

NATURAL

RESOURCES

HUMAN

ENTERPRENEURIAL

Agenda

TEN PRINCIPLES OF ECONOMICS WHICH EVERY MANAGER MUST KNOW

1. Scarcity leads to & choice leads to efficiency 2. Every human has to choose between different desires 3. When Mb > Mc, decisions are taken 4. Market mechanism is the best 5. But government does have a role to play 6. We respond to incentives 7. Productivity improves standard of living 8. Trade benefits all 9. Excess supply of money leads to inflation 10. Inflation and employment are incompatible.
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Agenda

MEANING OF MANAGERIAL ECONOMICS

Managerial economics is the use of economic analysis to make decisions involving the best use of an organization's scarce resources. It is closely related to management science (?)
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Evolution of Managerial Economics

Just few years ago, there was no separate discipline known as managerial economics. However, with the beginning of the management revolution the need for a specialized area known as managerial economics was felt.

Managerial economics provides a harmonious link between economics and various facets of business studies to facilitate managerial decision making.
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Agenda

MANAGERIAL ECONOMICS & OTHER DISCIPLINES

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MARKETING Demand

FINANCE Capital Budgeting

MANAGERIAL ECONOMICS
MANAGERIAL ACCOUNTING Break-Even Analysis DECISION SCIENCE Forecasting

STRATEGY Market Structure

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Agenda

TYPES OF DECISIONS

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IDENTIFY THE OBJECTIVES

DEFINE THE PROBLEM

IDENTIFY POSSIBLE ALTERNATIVE SOLUTIONS

EVALUATE ALTERNATIVES AND SELECT THE BEST CONSIDER SOCIETAL CONSTRAINTS CONSIDER ORGANISATIONAL AND INPUT CONSTRAINTS

IMPLEMENT AND MONITOR THE DECISION

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WHY SHOULD A FIRM BE IN BUSINESS?

THE FIRMS AND ITS GOALS

UNDERSTANDING CONSUMER BEHAVIOUR

DEMAND ANALYSIS

PLANNING FOR THE FUTURE

DEMAND FORECASTING

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TYPES OF DECISION MAKING (CONTD )

CHOICE OF A TECHNIQUE OF PRODUCTION THEORY OF PRODUCTION

HOW TO CONTROL COSTS?

THEORY OF COSTS

PRICING DECISIONS

PRICE & OUTPUT

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TYPES OF DECISION MAKING (CONTD )

ENTRY AND EXIT OF FIRMS

STRATEGY BUILDING

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Summary
Managerial economics is the outcome of management revolution. Managerial economics facilitates decision making It is closely related to business studies and other disciplines

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