JITHIN K THOMAS

BIMS
 What is Economics?
• Economics is the study of how people choose
to use resources.
• Resources include the time and talent people
have available, the land, buildings, equipment,
and other tools on hand, and the knowledge
of how to combine them to create useful
products and services
 Definition
• "Economics is the study of people in the ordinary
business of life."
-- Alfred Marshall, Principles of economics; an
introductory volume (London: Macmillan, 1890)
• "Economics is the science which studies human
behaviour as a relationship between given ends
and scarce means which have alternative uses."
-- Lionel Robbins, , An Essay on the Nature and
Significance of Economic Science (London:
MacMillan, 1932)
 Managerial Economics
• According to McNair and Meriam,
"Managerial Economics consists of the use of
economic modes of thought to analyse
business situation."
• Spencer and Siegelman have defined
Managerial Economics as "The integration of
economic theory with business practice for
the purpose of facilitating decision making
and forward planning by management."
 Business Decisions
• Financial Decisions
– Budgeting
– Capital Structure
– Dividend Distribution
– Tax Planning etc.
• Production Decisions
– Quantity and quality to produce
– Technology
– Plant location
– Pollution
• Personal Decisions
– Recruitment
– Selection
– Training
– Promotion
– Transfer
• Marketing Decisions
– Sales volume
– Sales force
– Market research
– Customer service
– Packaging
 Basic Economic Problem

• Unlimited wants
• Scarce means
 Central problem of Economic System
1. What to produce?
2. How to produce?
3. For whom to Produce?
4. How to achieve Full utilization?
5. How to maintain Economic Stability?
6. How much to save and how much to Invest?
7. How much Foreign Exchange?
 Price Mechanism
• Working of Price Mechanism
– In Free Capital Economy
– In Socialist Economy
– In Mixed Economy
 Nature of Managerial Economics
1. ME is micro economic in character
2. ME is concerned with normative micro
economics
3. ME is more pragmatic
4. ME takes help of macro economics
 Characteristics of Managerial
Economics
1. ME is micro economic in character
2. ME takes help of macro economics
3. ME is normative rather than positive
4. ME is conceptual and metrical
5. ME is more pragmatic
6. ME is goal oriented
 Scope of Managerial Economics
1. Objectives Of A Firm
2. Demand Analysis And Forecasting
3. Production And Cost Analysis
4. Pricing Decisions, Policies And Practices
5. Profit Management
6. Capital Management
Significance of Managerial Economics
• ME provides a number of tools and
techniques
– decision making
• ME provides most of the concepts
– analysis of business problems
• ME helpful in decision making
– Production technique, input mix, level of out put,
pricing, investment etc.
 Role of Managerial Economist in
Business
1. Study of the business environment
2. Business Plan and Forecasting
3. Study of business operations
4. Economic intelligence
5. Specific functions
6. Participation in Public Debate
 Responsibilities of Managerial
Economist in Business
1. Making successful Forecasts
2. Maintaining relationships
3. Keep management informed of the economic
trends
4. Earning full status on the managerial team
Managerial Decision Making Process