Professional Documents
Culture Documents
A simple definition of economics: It is a science of making decision in the presence of scarce resources.
Economic analysis evolves from basic propositions about how individual human beings (or individual economic agents) behave, in respect of the problem of scarcity, and reacts to an observed change. The purpose of economic activities is to satisfy maximum possible ends by sacrificing minimum possible resources.
Managerial Economics
Managerial economics is the study of how to direct resources in the way that most efficiently achieve a managerial role. Managerial economics deals with the concepts and analysis of demand, cost, profit, competition and so on, that are appropriate for decision making Business Economics is more comprehensive and broad based than Managerial Economics
Business Economics
Business Economics attempts to indicate how business
Each business essentially performs the task of transforming a set of inputs into output. This transformation is, in fact, the essence of economic activity.
In a business, a manager is a person who directs resources to achieve certain stated goal(s). These goals/ objectives of a manager are stated below:
Maximization of the value of the firm (profit maximization) Market share maximization Maximization of sales revenue Growth maximization Maximization of own benefits Maximization of shareholder value, etc.
5
Managerial Economics Application of Economic theory & Methodology to solve business problems
What is Macroeconomics?
Macroeconomics is the study of aggregates
Macroeconomics is concerned with the behaviour of the economy as a whole with booms & recessions, economys total output of goods & services, the growth of output, the rate of inflation & unemployment, the balance of payments, & exchange rates Macroeconomics deals with the long-run economic growth and with the short-run fluctuations that constitute the business cycles
Macroeconomics is a policy-oriented part of economics. The subject matter of Macroeconomics includes factors that determine both the level of these variables and how the variables change over time.
7
Focus of Macroeconomics
Macroeconomics focuses on the economic behaviour & policies that affect
Consumption & investment Trade balance (exports imports) Currency & exchange rates Determinants of changes in wages & prices Money, interest rates & Monetary policy Taxation, union budget, Govt. deficit, govt. debt & Fiscal policy Etc..
Another important issue: Should the govt. fix exchange rates or should exchange rates be market determined ?
Non exhaustive list of macroeconomic research 9 agenda
11
Framework
Macro economic scenario Policy/ Regulatory scenario
ECONOMIC ENVIRONMENT
12
Framework
Macro economic scenario
National Income Accounts Real Sector Monetary Sector Financial Sector Macro Aggregates Inflation Interest rate Exchange rate
ECONOMIC ENVIRONMENT
Business Strategy
Vertical integration Cost leadership Product differentiation Tacit collusion
13
14
The decision to produce additional cars, and therefore, to produce fewer refrigerators.
Although the production of car may cost Rs X per vehicle, its real cost to society is the number of refrigerators that society must forgo to get an additional car. In other words, if the labour, steel and energy needed to manufacture a car are sufficient to make 30 refrigerators, the opportunity cost of a car is 30 refrigerators.
16
17