FOUNDATION COURSE ECONOMICS

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Outline...
Why Economics in Mgt? What is economic decision? Fiv Ws Scarcity as economic problem Business environment Economic environment Political, social, legal environment Micro & Macro environment

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Why foundation course in economics

Economics-bthe mother of mgt sciences.
The word economy - Greek word for one who manages a household. . Economics - cause and effect of all the economic decisions Management students after the completion of this course will have to take various economic decisions in different capacities.
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Economics: Base of Mgt. Studies

Micro Economics
1. Theory of Demand & Supply Market Research Supply chain mgt 2. Theory of Consumer Behaviour Advertising Consumer behaviour 3. Theory of Production Prod & operation mgt Prod. Planning 4. Theory of Cost Cost Management 5. Theory of Markets, Price & Distri. Marketing
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Economics: Base of Mgt. Studies Macro Economics 1. Income & Employment theory 2. Theory of Consumption 3. Theory of Savings & Investment Business Environment 1. Theory of D & S of Money 2. Theory of Growth & Development Money & Capital market; Corporate Finance 1. Theory of Exchange 2. Theory of Public Finance International Business Mgt
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A household and an economy face many economic decisions:

Who

will work? What goods and how many of them should be produced? What resources should be used in production? At what price should the goods be sold? Cond. .

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Five Ws
What

to produce How to produce How much to produce Where to produce For whom to Produce
In

other words, economics studies how the prices of labor, capital, and land are set in the economy, and how these prices are used to allocate resources.

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Society and Scarce Resources:

What are economic decisions?
Economic decisions refer to decisions involving transactions in terms of cash or kind. The resources are scarce relative to their needs with alternative uses. Therefore, the management of societys resources is important because resources are scarce.

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Scarcity . . .
. . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.It is relative to needs/ends.

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Economics
Economics is the study of how individuals and society use, choose and manage their scarce resources(scarcity) optimally (efficiency) and distribute them among different people. Scarce resources refer to men, material, machines, money, time, energy, information etc. Five Ws are at the center stage and alternative economic systems organizing the society. The market economy, the command economy and the mixed economy.
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Why study Economics . . .

How

people make economic decisions.

How
The

people interact with each other.

forces and trends that affect the economy as a whole.

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Business Environment
It consists of two factors Internal environment firm's resources, business strategy, value system, objectives, mgt structure External environment business opportunities & threats to business Business environment consists of economic, legal, social & political environment.
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Economic Environment
Core of all external environments Economic strengths & weaknesses important for determining legal, social & political environment Economic policies, domestic & international environment. Important to determine business environment.

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Economic environment cont..

It includes a. Nature of economy (rich/poor) b. Structure of economy(composition of NI) c. Economic policies(industrial, trade, foreign exchange, investment, fiscal, monetary, etc. d. Economic conditions(domestic & international)
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Political Environment
Politics can often determine economic & business policies. It includes a. Political structure b. Economic systems c. Economic roles of Govt. d. Domestic & international trends

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Legal Environment
Political & economic environment governs legal environment. It influences business environment a. Laws to control investment b. Laws to regulate the conduct of business- standards, packaging, ethics, etc. c. Laws to protect consumer interests

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Micro & Macro Environment

Micro env immediate environment which includes suppliers, marketing intermediaries, competitors, customers & the public. Macro- demographic, economic, technical, political & cultural environment. Macro environments is more uncontrollable than micro.

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Micro & Macro Economics

Micro studies individual behaviour of consumer, firm, market price, industry, etc. Macro studies overall performance of the economy. It is concerned with aggregate savings, agg consumption, total emp, interest, money supply, etc.

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Positive verses Normative economics

Positive eco emphasises on depicting the facts & reality. It relies on alysis & empirical evidence. Normative involves ethical precepts & norms of fairness. Economics deals with both normative as well as positive science.

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