Date post: | 22-Jan-2018 |
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MANAGERIAL ECONOMICS
IS THE INTEGRATION OF ECONOMIC THEORY WITH
BUSINESS PRACTICE
FOR
THE PURPOSE OF
DECISION MAKING AND FORWARD PLANNING
BY THE MANAGEMENT
BASIC INGREDIENTS:
ECONOMICS PROVIDES A SET OF CONCEPTS
THESE CONCEPTS FURNISH THE MANAGER WITH
TOOLS AND TECHNIQUES OF ANALYSIS
ECONOMIC ANALYSIS IS AN AID
TO
UNDERSTAND
BUSINESS PRACTICES
IN A GIVEN ENVIRONMENT AND THEREBY MAKE BUSINESS DECISIONS WHICH ARE PRIMARILY ECONOMIC IN NATURE
DECISION MAKING IS A BASIC FUNCTION OF MANAGEMENT
ECONOMICS THEREFORE IS A VALUABLE INPUT
IN A DECISION MAKING PROCESS OF MANAGEMENT
SIX STEPS TO DECISION MAKING
• DEFINE THE PROBLEM
• DETERMINE THE OBJECTIVES
• EXPLORE THE OBJECTIVES
WHAT IS ECONOMICS?
• OBJECTIVE FUNCTION
• LIMITED RESOURCES
• ALTERNATIVE USES
• OPTIMAL ALLOCATION OF RESOURCES
• FEASIBILITY AND OPTIMALITY
ECONOMIC ANALYSIS-
• STATIC
• COMPARATIVE STATIC
• DYNAMIC
ECONOMIC ANALYSIS IS THE BASIS OF ECONOMIC POLICY
BUSINESS DECISIONS:
ESSENCE OF AN ECONOMIC DECISION IS THE
SOLUTION TO AN ECONOMIC PROBLEM
PROBLEM OF CHOICE
ECONOMIC DECISION MAKING
NATURE OF DECISIONS:
• INTUITIVE AND SCIENTIFIC
• STRATEGIC AND TACTICAL
• DECISIONS UNDER VARYING DEGREES OF
UNCERTAINTY
SCOPE AND STRUCTURE OF ECONOMIC ANALYSIS:
• DEMAND ANALYSIS-
-STRUCTURE OF DEMAND –
-SENSITIVITY OF DEMAND TO VARIOUS PARAMETERS SUCH AS PRODUCT PRICE, CONSUMERS’ INCOME, PRICES OF OTHER PRODUCTS, ADVERTISEMENTS ETC.
-DEMAND FORECASTING
• COST ANALYSIS
• PRODUCTION ANALYSIS
• OBJECTIVES OF A BUSINESS FIRM
• PRICING AND OUT PUT DECISIONS UNDER
ALTERNATIVE MARKET STRUCTURES
• INVESTMENT ANALYSIS
• ECONOMIC POLICY FRAMEWORK
• NATIONAL INCOME AGGREGATES
• BUSINESS ENVIRONMENT
• MODELS OF INCOME DETERMINATION
• MONEY MARKET
• CAPITAL MARKET
• FOREIGN EXCHANGE MARKET
• FISCAL AND MONETARY POLICIES
FUNDAMENTAL CONCEPTS:
• FUNCTIONAL RELATIONSHIPS
• DERIVATIVES AND RELATED CONCEPTS
• MARGINAL ANALYSIS
• CONCEPT OF TIME PERSPECTIVE
ROLE OF A BUSINESS ECONOMIST:
• NATIONAL AND INTERNATIONAL LEVEL STUDIES
• INDUSTRY LEVEL STUDIES
• PRODUCT LINE RESEARCH
• SALES FORECASTING
• ECONOMIC ANALYSIS OF COMPETING COMPANIES
• PRICING PROBLEMS OF INDUSTRY