Definition

Managerial Economics can be defined as amalgamation of

economic theory with business practices so as to ease decision-
making and future planning by management.

• “The Integration of economic theory and business practices

for the purpose of facilitating decision-making and forward
planning by management” - Spencer and Seligman

• “Managerial Economics can be viewed as an application of that

part of microeconomics the focuses on such topics as risk,
demand, production, cost, pricing, and market structure” –
Peterson and Lewis
Demand
Economists use the term demand to refer to the
amount of some good or service consumers are willing and
able to purchase at each price.
Demand is the quantity of a good or service that
consumers are willing and able to buy at a given price in a
given time period
Law of Demand
• The law of demand states that, "conditional on all else
being equal, as the price of a good increases, quantity
demanded decreases; conversely, as the price of a good
decreases, quantity demanded increases".
In other words, the law of demand describes
an inverse relationship between price and quantity
demanded of a good. Alternatively, other things being
constant, quantity demanded of a commodity is inversely
related to the price of the commodity.
Factors Affecting Demand
1. Price
2. Income
3. Price of Related Goods
i. Substitute Goods
ii. Complementary Goods
4. Tastes and Preferences
5. Expectations
 Individual Demand and Market Demand
• Individual demand describes the ability and willingness of a single
individual to buy a specific good or service. 
• Market demand describes the quantity of a particular good or service
that all consumers in a market are willing and able to buy. In other
words, it represents the sum of all individual demands for a particular
good or service