r- [oo nen cere ET pred ani ma Ay Se pe eee + tag sous 1q. assure st AN TOMA) SOTNONODA TVRITDVNVIN + — 1 @ boroys aA od y © scanned with OKEN ScannerDe Keke Shading (3) According 10 Milton H Spence ME is the integr oe Practices for the and [puies Siege ‘auion of economi and for ic theory with business PixPose of facilitating decision making ‘ard planning by management = Iman * Economic Theory & Business Methodology Management TT Decision Problems ME Application ¢ Economics to solve business problems Optimal solution to ess problems business pro Body of knowled: techniques and practices rab may be deftrad ad a body of ne And -practiy hick min rhe tb feslge tech comaepbs ohich PR Urtfef vy daily ay csadinsd yeaeeiel a a awe % (© Scanned with OKEN Scanner© Scanned with OKEN ScannerDIT e © Scanned with OKEN Scanner(© Scanned with OKEN Scannerwith Economic * Positive E: a7 ‘Conomics — Explain the ec ay Of the individuals & the firms. (eg eae ~ Normative Economics - What ought to be dorie p(B aan — elluher As * Micro Economics — Study of the economic behaviour Relationship w; / 1 Relationship wat oreseiseiolines vi a| of individuals, firms . td a » Macro Economics ~- Study of the Entire economy ts oancrh be whe : 2. Management Theory & Accounting Pi Maximisation, Wealth Maximisation, Growth Maximisatio Cost, revenue information etc 3.M.E._& Mathematics - Profit maximisation, cost $minimisation, sales optimisations, optimum use of Tesources, incremental cost, elasticity of demand Geometry Algebra, calculus, logarithms, vector, matrix, LPP, Inventory models, game theory etc. 4, ME. & Statistics - Demand, Tastes, Fashion & Changes in income on demand Profitability, forecasting techniques, correlation & multiple regressions. {robot 5. MLE. & O. 6. M.E. & Decision Theory 7. M.E. & Computer Science (© Scanned with OKEN ScannerTM Ec pone Nature of an study iso no eNOMICS iM character, because the unt of ME. does not ai of study 2M prncineg uses that body of economic concepts and Leora Neh Is known as “Theory of the Firm’ or Economics of the Firm’, in addition it also seeks to apply Profit theory which forms part of distribution theory in economics 3.ME. is pragmatic — it avoids difficult abstract issues of economic theory but involves complications ignored in economic theory to face the overall situation in which decisions are made. e.g. economic theory appropriately ignores the variety of background and training found in individual firms but ME considers. 4. ME. - Normative (Prescriptive) ~ ought to be) (v - Positive (descriptive economics) (X) - eg. law of demand 5, Macro economics is also useful in ME Difference between M.E. & Economics ieal with the entire economy as a unit peruns 4. ME. ~ Application of economic principles | Eco — body of principles itself 2. ME. - Micro in character Eco - it is both micro & macro in characters 3, ME. — Micro in character but it has nothing to do with individual's economic problems. paler economics as a branchséconomics deals with both. Economics of individual's & economics of a firms. 4. Micro Economics - as 2 branch of economics Distribution theory - wages, interest, and profit are also alt with » Sarin ME, ~AiBhily-broft theory is used. canines tbat te loci BIG Stu’ ononp iff cieuk hat aa clonable ow © scanned with OKEN Scannerae sanjewaire panesdsiP J0 1809 - f “4 Z'S13C1 J0 1800 hyunyoddo ous ‘Ayo sun 02 30 X JO SHUN OK ‘eonpoid ues sulyoew yeur j) peonposd aneu pINw, yorum Jo Ayquenb ay ‘ai0je10u) ‘st x Jo Ayquend uanib © Bu ynpoud JO 3800 Ayunpoddo euy ‘A 10 x sayjre eanpoud ued SUILDeN © W ‘sanjunoddo Jeu? yo aoyuoes ou sauinbe: asn Si, ours 0182 St ‘asodind sayjo Aue oj ssajasn Si yeu) eulyoew © BuIsN JO inpoddo SUL ( spn joyn 2v06.0} uaeq eney pinom ui: Yew) e Bulsn Jo ys09 AIIUNHO ‘uo eonpaid 0} aulyd yddo OU, quaukojdue Bunjeas hq wee pinoo ay AVeIes ssouisng umo Si OF sejonep snauaidaijue Ue 2 inyoddo aus (1!) ‘seumuan JOU j2 uaag Kau ped ‘spuny asous uo pauses 2a pIno: ‘au si ssauisnd tino §.2u0 ul peKo|dwe SPUN} AUH 10 1509 wunyoddo au. (") st jo jou au un pooisvepun 2a seq UES SL a peinbas sanyewye Jo eoyuoes oul IEE ep eyo 809 Ayunpodde auy Aq ~ 2jdouud 1S0D uoddo 'y po} AauOW YONLY OH, Ad = Ad Js ="Ad inoasiG ' usieak u seye jareninba oq pinom fer mo! gecvoetpes Ce ferpnel | - 2 phe hes poueg 6u07 poued uous * any Piven 72 qos veri FY : qieows ne rere POUL LOUS AA, yeysseyy 1p prey 24) ut weyodui S11! - aidouNg ) ennoedsue, Sou Od SUL Z nan = 4 hy ay say xa) enn meme tr ay om me tomy Ppt: her poo tt eee ae a sy 2 fe MoM) > Fe yerweeny. gincthontuoe © scanned with OKEN ScannerMAT represents only s recorded in the books of account = The opportunity cost of any commod The OPPOHunty cos! of any commodty the ned best Ah nis sacriiced 1. The opportuni unity costs of a given sum of money can never be zero. - - “ na 2. All decisions which involve choice must involve opportunity cost calculation ves & hence not 5. The Equimarginal Principle - An input should be allocated in such a way that the yale added by the last unit is the ‘same in all uses. a ‘Suppose, a firm has 100 units of labour at its disposal The firm is engaged in four activities which need labour services viz, A. B.C and D. it can enhance any one of these activities by adding more labour but only af the cost of other activities It should be clear that if the value of the marginal product is higher in one activity than another, an optimum allocation has pignpeen attained. It would, therefore, be profitable to shift Topour from low marginal value activity to high marginal value ivity, thus increasing the total value of all products taken together. To take an example, if in activity A, the value of marginal product of labour is Rs. 20 while that in activity Bit IE Re. 30 is profitable to shift labour from activity A to activity B thereby expanding activity B and reducing activity A/ The optimum will be reached when the value of the marginal product is equal in all the four activities or, symbolically expressed, when VMPix. = VMP ia = VMPic = VMPip Value of marginal product ati © scanned with OKEN Scannermuh monty relay ty be palebors 4 Belov a Yee © Scanned with OKEN Scanner