Managerial Economics

Prepared by:
Mrs.P.Chandradevi
Academic Year:
2019-2020
Odd
Sem Unit 1 -
 Objectives

1. To clear about the concept of Economics

2. To understand about Nature & scope of
Economics
 Introduction

The wordEconomics is derivedfrom the Greek word

“OKIOS NEMEIN” meaning household management

Man is a bundle of desires. Goods and services satisfy

these wants. But almost all the goods are scares

To produce goods factors of production are needed and

these are all scarce
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 Managerial usedsynonymously with business
economics,
economics. It is a branch of economics that deals with the
application of microeconomic analysis to decision-making
techniques of businesses and management units.

It acts as the via media between economic theory and

pragmatic economics. Managerial economics bridges the
gap between "theory and practice".

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 Definition

According to Spencer and Siegelman:

“The integration of economic theory with business

practice for the purpose of facilitating
decision-making and forward planning by
management”.

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 “Managerial Economics is economics
applied in decision making. It is a
special branch of economics bridging
the gap between abstract theory and
managerial practice.”
– Haynes, Mote and Paul

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 The Study of Economics

Economics is the study of how individuals and

societies choose to use the scarce resources that
nature and previous generations have provided.

It is the study of economic problems. Wants are

motive for economic activity. Wants leads to efforts
and which lead to satisfaction

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 Why Study Economics?

To learn a way of thinking

Three fundamental
concepts:

Opportunity
cost
Marginalize,
Managerial
and Efficient
 Opportunity
Cost
• the best alternative that we forgo, or give up, when we make a
choice or a decision
• arises because time and resources are scarce.

Marginalize
• In weighing the costs and benefits of a decision, it is important to
weigh only the costs and benefits that arise from the decision

Efficient Market
• is one in which profit opportunities are eliminated almost
instantaneously
• Profit opportunities are rare because, at any one time, there are many
people searching for them

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 Nature of Managerial Economics

Managerial Economics is a
Science Managerial
Economics requires Art
Managerial economics is helpful in optimum resource
allocation
Managerial Economics has components of micro
economics Managerial Economics has components of
macro economics Managerial Economics is dynamic
in nature
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 Managerial Economics is a Science

Science is a Systematic bodyof Knowledge. It is based

onthe methodical observation.

Managerial economics is also a science of making decisions

with regard to scarce resources with alternative
applications.

It is a body of knowledge that determines or observes the

internal
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and external environment for decision making.
 Managerial Economics requires Art

Managerial economist is required to have an art of utilising

his capability, knowledge and understanding to achieve the
organizational objective.

Managerial economist should have an art to put in practice

his theoretical knowledge regarding elements of economic
environment.

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 Managerial economics is helpful
in optimum resource
allocation

The resources are scarce with alternative

uses. Managers need to use these limited
resources optimally.

Each resource has several uses. It is

manager who decides with his knowledge
of economics that which one is the
preeminent use of the resource.
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 Managerial Economics has components
of micro economics

The managerial economics deals with the

problems faced by the individual organization
such as main objective of the organization,
demand for its product, price and output
determination of the organization, available
substitute and complimentary goods, supply of
inputs and raw material, target or prospective
consumers of its products etc.
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 Managerial Economics has components
of macro economics

They are affected by the external environment of the

economy in which it operates such as government
policies, general price level, income and employment
levels in the economy, stage of business cycle in
operating,
which economy is rate, balance payment,
exchange of and general
expenditure, investment
consumers, market conditions patterns of the
saving
etc.
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 Managerial Economics is dynamic in nature

The nature and attitude differs from person to

person. Thus to cope up with dynamism and
vitality managerial economics also changes
itself over a period of time.

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 Question

1. What is Economics?
2. What is Managerial
Economics?

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 Keyword

1. Opportunity
Cost
2. Marginalize
 Next Class

Scope of Managerial
Economics