Managerial Economics

Let us see what is Economics ? Economics is the social science that analyzes the
Production Distribution Consumption

of goods and services

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Concept
Like parent discipline of economics M.E. has to serve as a science of making a choice.

It has to guide Business Executives in:1. Making decisions 2. Making certain predictions

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Definition
M.E. concerns efficient direction of business orgonisation so as to make, a productive enterprise resources. out of human & material Savage & Small

It is the integration of economic theory with business facilitating practice decision for the purpose of making & 1/8/13 forward 33

Nature Of Managerial Economics

With the help of Characteristics of M.E. we can understand the nature of managerial economics.
1) Fundamental Academic Subject. 2) Economic

rationale

of

Business

Administration
3) Allocation of Resource
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6) Market Conditions 7) Macro Setting 8) Profit & Pricing 9) Basis for Decision-making 10) Pragmatic Approach 11) Normative Science 12) Elements of Macro Economics. 13) Help of Quantitative Techniques 14) Socio-cultural Aspects.
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Scope Of Managerial Economics

1) Basic problem. 2) Theory of firm. 3) Orgonisation of Business. 4) Demand Analysis. 5) Production & Cost Analysis.
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6)

Pricing & Output Determination.

7) Cost-Benefit Analysis. 8) Profit Analysis. 9) Capital Management. 10) Government & Business.

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Micro-economic Analysis
Micro Economics studies the behaviour of small individual factors in an economy. It mainly focuses on:1. Individual Consumer Satisfaction 2. Market

Demand

for

the

product

of

an

individual producer.
3. It study the equilibrium of firm & Industry
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Micro Economics
Micro Economic Analysis
Theory of Commodity Prices Theory of Factor Pricing Economics of Welfare

Theory of Demand of Supply

Theory

Rent Profit
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Wages
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Interest

Scope Of Micro-economics
1. Are the resources in the country fully utilized

or not?
2. What

should

be

produced

&

in

what

quantity? (Theory of Value)

3. The

problem

of

selecting

technique

of

production. (Theory of Production)

4. How the goods & services produced are

distributed? (Theory of Distribution)

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5. How effectively the resources are allocated ?

(Economics of Welfare)
6. Whether the capacity of the economy to

produce goods & services is growing or is static ? ( Theories of Economic Growth)

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Importance of Micro-Economic Analysis

1. Allocation of Resources 2. The distribution of national income 3. Consideration of welfare 4. Importance

of

applied

field

of

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economics

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Limitation of Micro-Economic Analysis

1. It

always

thinks

of

individual

factors

of

production or individual consumer so it may not be always true on aggregate levels.

2. Its result or conclusions are always on certain

assumption.
3. The

aggregate

analysis

or

the

overall

approach to any economic problem is beyond

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the reach of it.

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Macro-Economic Analysis
Theory of
Theory of Economic Income & employ Growth Theory of Theory of General Distribution price level

Theory of consumption

Theory of Investment

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Theory of Business Cycle

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Importance Of Macroeconomic Analysis

1. It never neglect the relationship between

demand & supply as in case of microeconomic analysis.

2. It always gives the complete picture about

the economy as whole.

3. Macro-economic s has increased the utility

of economics.
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4. It can be used for the development of micro1/8/13

Difference Between Micro & Macro Economics

NO Micro Economics 1 Price is taken 2 equilibrium force Physical units Macro Economics asIncome is taken Equilibrium Force ofPhysical Units can not as of be

commodity can be used Commodity 3

used As consumer & producerIt can not be the case in are treated as 2Macro-Economics, one can independent classes onenot neglect the effect of can neglect influence ofsupply of good. supply side 1/8/13 It is sufficient to takeWith the market supply &

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