TO BE DELIBERATED UPON………….

Circular Flow of What is Microeconomics Nature and Decision Making

Economic Activity Economics? vs. Scope of Process
Macroeconomics Managerial
Economics

1 2 3 4 5
CIRCULAR FLOW OF ECONOMIC ACTIVITY
FACTORS OF PRODUCTION
Price of Goods and
Services/Consumption
Expenditure
Subsidy
 DEFINITION

 Economics is the science that deals with production, exchange and consumption of
various commodities in economic systems. It shows how scarce resources can be
used to increase wealth and human welfare.

 The English word economics is derived from the ancient Greek word “oikonomia”
(Oikos: Home, Nomos: Management)—meaning the management of a family or a
household .

 “Study of Wealth” By Adam Smith

 Managerial Economics (Business economics) is “ Science which studies human
behavior as a relationship between ends and scarce means which have
alternate uses.” By: Lord Robins
 CONTD…….

 Economics is a study of mankind in the ordinary

business of life, i.e., Economic aspect of human life.
 Economics studies both individual and social
actions aimed at promoting economic welfare of
people
By: Alfred
Marshall

Wealth, Welfare, Scarcity, Choice making, Growth

TIT
LO
M
IP
M
MICROECONOMICS VS MACROECONOMICS
Microeconomics
 Microeconomics concentrates on the behavior and
performance of the individual units,
 Consumers, Family, Industry, Firms
 The demand plays a key role in determining the
quantity and the price of a product along with the
price and quantity of related goods
(complementary goods) and substitute products,
so as to make a judicious decision regarding the
allocation of scarce resources, concerning their
alternative uses.
Macroeconomics
 Macroeconomics concentrates on the behaviour
and performance of aggregate variables and those
issues which affect the whole economy.
 It includes regional, national and international
economies and covers the major areas of the
economy like unemployment, poverty, general
price level, GDP (Gross Domestic Product), imports
and exports, economic growth, globalization,
monetary/ fiscal policy, etc.
 It helps in resolving the various problems of the
economy, thereby enabling it to function
efficiently.
MANAGERIAL ECONOMICS
NATURE AND SCOPE OF MANAGERIAL ECONOMICS
Nature
 Microeconomic
 Science and Art
 Involves problem solving
 Helps Optimum resource utilization
 Has a component of Macroeconomics
 Dynamic in nature
Scope
 What to produce & How to produce (Production
analysis)
 How much to produce (Output analysis)
 Who will consume & how much will they consume
(Demand analysis)
 Cost and Price analysis
 Profit analysis
 1 Profit Maximization

2 Firm’s Value Maximization

5 Sales and Revenue Maximization

4 Size Maximization

3 Long Run Survival

FIRM’S OBJECTIVES
  No. of chairs made per month – 100

 Sells per piece @ Rs 150

 Rent of Shop + Cost of Wood + other Materials = Rs 5000

THE
 Monthly Wage of two workers = Rs 2400
CARPENTER’S
 Electricity Bill = Rs 500
ACCOUNTING AND
ECONOMIC  Own Fund = Rs 25000

PROFIT?  Loan from Bank = Rs 25000

 Interest Rate per annum = 18%

 Imputed/Implicit cost of Owner’s time, shop and funds =
Rs 3000 + Rs 1000 + Rs 250
DECISION MAKING PROCESS
Establishing Objective

Definition Of The Problem

Organizing And Analyzing Data

Identification And Evaluation Of

Alternatives

Choice Of Best Alternative

Implementation And Monitoring Of The

Performance Of The Chosen Alternative