Unit No 01

Scope of Managerial Economics


Managerial Economics
Managerial economics is concerned with the application of economic principles and methodologies to the decision-making process within the firm or organizations under the conditions of uncertainty.

Definition
According to MC Nair and Meriam, “Managerial economics is the use of economic modes of thought to analyze business situations.

·         A close relationship between management and economics has led to the development of managerial economics

·         Part of Micro Economics

·         Focus on risk, demand, production cost, pricing and market structure

·         Managerial economics is used by firms to improve their profitability.

·         It is the economics applied to problems of choices and allocation of scarce resources by the firms.

·         Application of economic theory and tools of analysis of decision science

Basic features of managerial economics
1. It is concerned with decision making of an economic nature
2. It is micro economic in character
3. It largely uses that body of economic concepts and principles, which is known as theory of the firm
4. It is goal oriented and prescriptive
5. Managerial economics is both conceptual and metrical. It includes theory and measurement.


Three Choice Problems of an economy

Scope of Managerial Economics
1. Resource allocation

2. Inventory and queuing problem

3.Pricing problem

4. Investment Problem

Managerial Economics and other disciplines
1. Micro economic theory
2. Macroeconomic Theory
3. Operations research
4. Theory of decision making
5. Statistics
6. Management theory and accounting


Economic Problems

Human wants are unlimited. When one want is satisfied, another arises. However, the resources to satisfy these wants are limited. This is called economic problems

a) unlimited Wants
b) Limited Resources
c) Alternative use of resources

Micro Economics
Microeconomics is the study of economic activity of an individual firm or a small group. It deals with the problems of production, consumption, pricing, income etc. It is a narrow concept.

Macro Economics
Macro economics is the study of economic activity of an economy
It deals with the problems of unemployment, poverty, foreign trade, literacy etc. It is a broad concept.

Comments

Post a Comment

Popular posts from this blog

Image
UNIT 10 MARKET STRUCTURE AND Barriers to Entry BARRIERS TO ENTRY CLASSIFICATION OF MARKET STRUCTURES The term ‘market structure’ refers to the degree of competition prevailing in that particular market. The power of an individual firm to control the market price by changing its own output determines the degree of competition and this power varies inversely with the degree of competition. The higher the degree of competition, the less market power the firm has and vice-versa. Market power is generally thought to be the ability of the firm to influence price. The four characteristics used to classify market structures are:   i) Number and size distribution of sellers,   ii) Number and size distribution of buyers iii) Product differentiation and iv) Conditions of entry and exit Based on the above characteristics markets are traditionally classified into four basic types. These are Perfect Competition, Monopoly, Oligopoly and Monopolistic Competition Perfect ...
Read more
  UNIT 8 SHORT RUN COST ANALYSIS The analysis of cost is important in the study of managerial economics. There are two types of cost analysis: Short run cost analysis & Long run cost analysis.   Cost Concepts That are Relevant for Managerial Decisions.   Actual Costs And Opportunity costs Actual costs are those costs, which a firm incurs while producing or acquiring a good or service like raw materials, labour, rent, etc. Opportunity cost is defined as the value of a resource in its next best use.   Explicit and Implicit costs Explicit costs are those costs that involve an actual payment to other parties. implicit costs represent the value of foregone opportunities but do not involve an actual cash payment.   Accounting costs and Economic costs All the types of costs incurred by a firm while doing business are called accounting costs. All the actual and implied costs incurred by a firm are called economic costs.   Contr...
Read more