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WORKING TOGETHER FOR A COMMON GOAL COORDINATION AN ACTIVITY OR ON GOING PROCESS AN ART OF GETTING THINGS DONE BY OTHER PEOPLE
THE FOCUS OF MANAGERIAL ECONOMICS IS ON HOW THE FIRM REACTS TO CHANGES IN ECONOMIC ENVIRONMENT IN WHICH IT OPERATES AND HOW IT PREDICTS THESE
CHANGES AND DEVISES BEST POSSIBLE STRATEGIES TO ACHIEVE THAT UNDERLIE ITS OBJECTIVES
THE MARKET IS THE SINGLE MOST IMPORTANT AND COMPLEX INSTITUTION IN OUR ECONOMY
1. Invisible hand
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3.Time perspective principle:take in to account both short run and long run perspectives
Opportunity Cost
To get one thing that we like, we usually have to give up another thing that we like. Making decisions require trading off one goal against another.
4. Discounting principle: if a decision affects cost and revenues at future dates,it is necessary to discount those costs and revenues to present values before a valid comparision of alternatives is possible A RUPEE TOMORROW IS WORTH LESS THAN A RUPEE TODAY
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5.equi-marginal principle:
An input should be so allocated that the value added by the last unit is the same in all cases
Be all and end all of all human efforts is consumption. The whole and sole purpose of economy is production of goods/ services for consumption now or in future.
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Macro economics is the study of the behaviour of the economy as a whole. It contrasts with micro eco which studies: A individual price A individual quantities, markets.
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is a science which studies human behaviour as a relationship between ends and human resources which have alternative uses. Prof Robbins
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He who can not see beyond the dawn will have much good wine to drink at noon, much green wine to cure his headache at dusk and only rain water to drink for the rest of the days.
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Heaven lies at the feet of mothers. Gods pleasure is in a fathers pleasure; and Gods displeasure is in a fathers displeasure. He who wishes to enter Paradise at the best door must please his father and mother. - Al-Quran Quoted by : A.P.J. ABDUL KALAM
In his book : The Family and the Nation
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Economics is the study of how men & society choose, with or without the use of money, to empoy scarce productive resources which could have alternative uses, to produce various commodities over time, and distribute them for consumption now and in the future among various people and groups. Prof. Samuelson
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Micro Economies
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Studies the behaviour of individual units and small groups individual consumes, producer, firm. How much to consume What to produce How to produce Where to produce
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Where to sell At what price Production Structure Technology Location How the market functions Working of a free Market Economy Role of price mechanism in allocating productive resources invisible hand.
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How a completely planned economy works. Scarcity and efficiency: economic benefits comes from self-interested actions of individuals.
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How factors of production are paid. What are the gains from international trade.
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Free Market Economy or Capitalist Economy Chief Features Right of private property Freedom of Enterprise Freedom of choice by consumers (consumer sovereignty)and factors of production
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Profit Motive Competition Role of Price Mechanism (Impersonal Forces of Market to Solve central problem of Economics). Markets stand for the forces of demand and supply. Each individual knows where his self interest- lies.
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Deciding what to produce Deciding how to produce Deciding what and for whom to produce Deciding what about rate of growth Solving all problems at the same time.
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Consumer Sovereignty
In a free market economy consumer is perceived to be sovereign Consumer places the order, decides what should be produced Consumers authority arises from his income. His ability to
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High pressure salesmanship puts a check on consumer sovereignty- radio, television, newspapers, hoardings at railway stations, airports, colonies, market place all these bombard consumers. Consumer sovereignty is indeed a MYTH.
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Does not ensure high rate of eco growth. Decline of competition and its adverse effects Concentration of wealth and income.
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Role of counter vailing power in correcting the weaknesses of a free market economy
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To day powerful corporate sellers often face equally powerful corporate buyers; the giant steel mill to the giant auto firm, the giant producers to the giant super market chain. The large firms no longer bargain with the individual employees, but with large and powerful unions.
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Solution
Gross Domestic Product (GDP)- A measure of Economic Activity. Aggregate consumptionvolume of goods and services devoted to current consumption during a period.
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Aggregate investmentVolume of goods and services devoted to capital formation during a period. Whole sale price index Consumer price index Total money supply, bank credit, foreign exchange reserve etc.
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Over production & unemployment are short run phenomenon Price & wage flexibility bring about full employment No govt interference or least interference
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Part - II
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Business economics applies economic tools and concepts to the management of business. In this sense business economics is called managerial economics or applied economics.
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Managerial Economics is concerned with exploring real world business application of the logical structure of microeconomics. The development of the discipline of Econometrics over last two decades has important implications for the pursuit of such real world applications of micro-economic concepts and precepts. We are now capable of estimating demand equations, cost functions, production functions and other relations of micro-economic theory into quantifiable form such that we can provide useful information to management for scientific decisionmaking.
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An Overview
Business Economics is both conceptual and metrical. As such the knowledge of a few fundamental concepts and a few measurement techniques, relevant in the process of applying economic analysis in examining business decisions, is basic to the subject of Business Economics.
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Business economics involves allocation of the resources available to a firm among its activities in a manner that the firm maximizes the profits sales and market share. Its concerned with the application of economics in decision making.
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Business Economics
What is Business Economics You should know compl exitiesof decision making problems of a business entity. You should know principles of economics and how they can be usefully employed is solving business problems and decision making
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Alternative Solutions
Expanding the capacity vs setting up a new plant vs any other alternative. Requires data and information Analyse policy environment and regulatory framework. Anticipate problem-areas
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In nutshell it can be concluded that business economics refers to the application of economic theory and the tools of analysis of decision science to find the optimal solution to business decision problems.
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Business economics is pragmatic. It is concerned with those analytical tools which are useful in improving decision- making Business economics brings forth solutions of problems, provides necessary conceptual tools and helps the decision maker by providing measurement of various economic entities and their relationships.
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Definitions
Managerial economics is concerned with the ways in which managers should make decisions in order to maximize effectiveness or performance of the organisations they manage. Business economics is a fundamental academic subject which helps to understand and to analyse problems of business 57 decision making.
Business economics is the integration of economic theory with business practices for the purpose of facilitating decision making and forward planning by the management. Management decisions problems can be solved by the application of economic theory and tools of decision sciences.
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In business economics mainly profit theory is used. Other distribution theories are not much used Business economics adopts, modifies and reformulate economic models to suit the specific conditions and serves the specific problem solving process.
All Macro Economic theories like wages, interest and profit are also dealt with in economics. It builds hypothesis and economic models.
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Though micro Micro in character economics as a deals only with branch of the firm and economics has nothing do deals with both with an economics of individuals the individual economic as well as economics of problems. the firm.
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