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Presented By: Presented To:

Virendra Pratap Singh Mr. Naresh Sharma
Roll No:-
MBA 1st Semester
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Ä V

  is the social science which studies human

behaviour in relation to optimizing allocation of available
resources.

Ä The term O

  came from Greek word DzOIKONOMIAdz

meaning management of house hold administration.

Ä A primary stimulus for the development of modern

economics was the desire to use an empirical approach more
akin to the physical sciences.
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Ä Vconomics aims to explain how economies work and how

economic agents interact.

Ä Vconomic analysis is applied throughout society.

Ä The main aim of economics is to study how people -

individuals , households ,firms, and nations- maximize their
gains from their limited resources and opportunities.
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Ä Managerial economics is the study of economic theories ,

logic , and tools of economic analysis that are used in the
process of business áO 
  .

Ä Vconomic theories and techniques of economic analysis are

applied to analyze business problems , evaluate business
options and opportunities with a view to arrive at an
appropriate business decisions.
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Ä DzManagerial economics is concerned with the applications of

economic concepts and economics to the problems of formulating
rational decision makingdz - |

Ä DzManagerial economics is the integration of economic theory with
business practice for the purpose of facilitating decision making
and forward planning for management.dz
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Ä DzManagerial economics applies the principles and methods of
economics to analyze the problems faced by management of a
business and to find the best solutions that advance the best
interests of such organizations.dz Ȃ‰ 
 

 



There are three main contributions of economic theory to

business economics:
1) building analytical models , which help to recognize the
structure of managerial problems ,eliminate the minor
details that can effect proper decision making and help to
concentrate on main issue.
2) contributes to business analysis .
3) offers clarity to various concepts used in business analysis ,
which enables the managers to avoid conceptual pitfalls .
  

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Ä It gives a clear understanding of various economic concepts

used in business analysis.

Ä It helps in ascertaining the relevant variables and specifying

the relevant data.

Ä It states the general relationship between two or more

economic variables and also events

Ä Application of relevant economic theory provides

consistency to business analysis and help in arriving at right
conclusions.

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Ä It is an applied economics.

Ä Its scope comprises all those economic concepts

,theories and tools of analysis which can be used to
analyze issues related to demand prospects ,production
and cost , market structure , level of competition and to
find solutions to practical business problems.
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Ä Operational issues or internal issues : to which microecono-

mics is applied.

Ä Vnvironmental or external issues : to which macroeconomics

is applied.






Basic internal issues are :-

Ä ÷hoice of business and nature of product
Ä ÷hoice of the size of the firm
Ä ÷hoice of price
Ä ÷hoice of technology
Ä How to promote sales
Ä How to decide on new investments
Ä How to manage profit and capital
Ä How to manage inventory
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Ä Theory of demand
Ä Theory of production and production decisions
Ä Analysis of market structure and pricing theory
Ä Profit analysis and profit management
Ä Theory of capital and investment decisions


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The basic environmental issues are :

Ä Issues related to macroeconomic trends in the economy.

Macroeconomic trends are indicated by the trends in macro
variables , e.g., the general trend in the economic activities of the
country, the level of GDP, investment climate and trends in national
output.
Ä Issues related to foreign trade. These include the fluctuations in the
international markets , exchange rates , inflows and outflows of
capital in an open economy and prospects in international market.
Ä Issues related to government policies.

Answers to such issues are obtained through the study of

macroeconomics
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A theory which appears logically sound may not be directly

applicable in practice in case of economics . This results
in a gap between the theories of economics and its actual
practice .
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There is undeniably a gap between economic theory

and the real economic world . Vconomic theories do not
offer a custom made or readymade solution to business
problems but they actually do is to provide a framework
for logical economic thinking and analysis .