THE UNIVERSITY OF ZAMBIA

BBA 9425 MANAGERIAL ECONOMICS

BY

TOBIAS MICHELO(BA, UNZA; MScEC, UZ)

SCOPE & NATURE OF MANAGERIAL
ECONOMICS
The primary objective of this course is:

 To learn the basic Economics and its application in

decision making in the business environment.
To understand the principles of Economics
To learn the demand analysis and various cost aspects
To learn market structures
To learn about profits, profit process and relationship to
cost.
To learn the macroeconomic environment
 MANAGERIAL ECONOMICS
DEFINITIONS
•Managerial economics is the synthesis of microeconomic
theory and quantitative methods (mathematics and statistics)
to find optimal solutions to managerial decision-making
problems.

•Thus, in managerial economics, we combine microeconomics

principles, with managerial practices in order to provide a
logical framework for management, or rather policy making
as well as solve economic problems.

•The ultimate goal is that as managers, we should make very

effective decisions and operate at a barest minimum cost
while yielding maximum or optimal returns.
 THE MEANING, NATURE AND SCOPE OF
ECONOMICS.
DEFINITION OF ECONOMICS.

• Economics is the study of how individuals and societies

make choices, subject to given constraints or limitations that
human beings face in their everyday life.

• Or, the study of how individuals and societies chose to utilize

scarce resources to satisfy their unlimited wants.

• From the above definitions, we can easily deduce that the

central economic problem for society is how to reconcile the
conflict between people’s unlimited desires for goods and
services, and the scarcity of resources (such as labor,
machinery, and raw materials) with which these goods and
services can be produced.
 SCOPE OF ECONOMICS

• Much of economics is devoted to the study of how markets and prices

enable society to solve the problems of what, how and for who to
produce. Thus in answering the three fundamental questions above,
economics explains how scarce resources are allocated between
competing needs of society.
• The “What” refers to the physical goods such as steel, cars, and
strawberries. Services include activities such as live theatre
performances.
• The “How” refers to the most efficient possible way to produce these
goods because you want to minimize the cost of producing these
goods while at the same time maximizing the benefits or outputs.
• “For who” refers to the end consumer. E.g., it is more prudent to make
or produce education material in a University or college setting,
fertilizer in a rural setting, etc.
THE CONCEPT OF SCARCITY & CHOICE IN
ECONOMICS
• In Economics, Scarcity simply means demand is more than supply, or
wants are more than resources. Thus, scarcity is a relative term.
• To address the problem of scarcity therefore, society must make
choices. Much of economics is devoted to the study of how markets
and prices enable society to solve the problems of scarcity and choice.
In other words, economics explains how scarce resources are allocated
between competing needs of society by answering the three basic
questions namely; “What”, “How” and “For who”?
• The “What” refers to the physical goods such as steel, cars, and
strawberries. Services include activities such as live theatre
performances.
• The “How” refers to the most efficient possible way to produce these
goods because you want to minimize the cost of producing these
goods while at the same time maximizing the benefits or outputs.
• “For who” refers to the end consumer. E.g, it is more prudent to make
or produce education material in a University or college setting,
fertilizer in a rural setting, etc.
 PROBLEM OF CHOICE
UNLIMITED WANTS LIMITED RESOURCES

SCARCITY

INTERNAL. i.e, Skill,

Money, Managerial CONSTRAINTS External (Legal)
Ability
BASIC QUESTION

WHAT TO PRODUCE, HOW

HOW TO PRODUCE FOR WHO TO PRODUCE
MUCH TO PRODUCE
 DECISION MAKING
Decision making process involves the following:
i.Establishing the objectives, i.e. What is it that you want to
achieve as a business entity?

i.Defining the problem, i.e. What problems are you facing? Is

it high production costs? Quality of your product? marketing?
Less revenue?
ii.Options, i.e. Given your problem, what options do you have
available?
iii.Solutions
iv.Implementation (Strategic Plan), i.e. Content of your plan,
and how you want to monitor and evaluate it.