Economy

The word economy comes from a Greek word for

one manages a household.
Society and Scarce Resources
The management of societys resources is important
because resource are scarce.
Scarcity means that society has limited resources
and therefore cannot produce all the goods and
services people wish to have.
Scarcity implies choice and choice implies cost.
Introduction
scarcity
Unlimited choice
Limited resources
What to produce?
How to produce?
For whom to produce?
Economics : Science of scarcity
Scarce resources for society :
- Land
- Labour (L)
- Capital (K)
- Skill
Scarce resources of a business unit :
- Men
- Machine
- Material
- Money
- Mineral
Unlimited desires : Profitability ()

Economics is the study of how society manages its
scarce resources.
Economics as a science is concerned with the
problem of allocation of scarce resources among
competing ends (Desires).
What is Economics
The Circular Flow of Economic Activity
What is Managerial Economics

Managerial economics is the branch of economics
which deals with managing the scarce resources of
a firm.

Managerial economics uses the tools and
techniques of economic theory for effective and
efficient utilization of economic resources, in order
to optimize the profitability of a business
organization.


Introduction to Managerial Economics





.
Nature of Managerial Economics
Managerial Economics is the integration of
economic theory with business practice for the
purpose of facilitating decision making and
forward planning by the management.
Spencer & Siegel man
Managerial Economics



Micro & Macro Economics
Microeconomics focuses on the behaviour of the
individual actors on the economic stage i.e. firms
and individuals and their interaction to markets.
Managerial economics should be thought of as
applied microeconomics.
Macroeconomics is the study of economic system
as a whole. It includes techniques for analyzing
changes in total output, total employment,
consumer price index, unemployment rate, exports
and imports. Macroeconomics addresses questions
about the effect of changes in investment,
government spending, tax policy on exports, output,
employment, prices
Managerial Economics is basically micro-economic in
characteristics.
Managerial Economics takes the help of macro-
economics to understand and adjust to the environment
in which firm operates.
Managerial Economics follows normative school of
thought rather than positive school.
Managerial Economics is prescriptive rather than
descriptive, in approach.
It is both conceptual (qualitative) as well as metrical
(quantitative).
The contents of Managerial Economics are based mainly
on the theory of the firm.
Characteristics of Managerial Economics
Demand Analysis and Demand Forecasting

Production Analysis

Cost Analysis

Pricing and Output

Profit Management

Scope of Managerial Economics
Relationship of ME with other
disciplines

Mathematics : Geometry , algebra, calculus ,
determinants , vectors.

Operations Research: Linear Programming ,
Queuing

Statistics : Theory of probability

Traditional Economics :