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What is Economics? What is Micro and Macro economics? What is Managerial Economics?
Introduction to Managerial
BUSINESS ADMINISTRATION DECISION PROBLEMS
MANAGERIAL ECONOMICS : INTEGRATION OF ECONOMIC THEORY AND METHODOLOGY WITH TOOLS AND TECHNICS BORROWED FROM OTHER DECIPLINES
Core content of Managerial Economics : Demand Analysis and forecasting of demand Production decisions (Input-Output Decisions) Cost Analysis (Output - Cost relations) Price Output Decisions Profit Analysis Investment Decisions
What is Microeconomics and Macroeconomics ? Ragnor Frisch : Micro means Small and Macro means Large Microeconomics deals with the study of individual behaviour. It deals with the equilibrium of an individual consumer, producer, firm or industry. Macroeconomics on the other hand, deals with economy wide aggregates. Determination of National Income Output, Employment Changes in Aggregate economic activity, known as Business Cycles Changes in general price level , known as inflation, deflation Policy measures to correct disequilibrium in the economy, Monetary policy and Fiscal policy
Production Process
Services
Entrepreneurship
The internal marketing environment includes factors that the business can directly influence. This can include:
The organizational structure The strengths and weaknesses of a department Financial stability and resources Staff morale Spare production capacity Client base Pricing structure Selling channels Staff skills
The macro-environment into four areas Political, Economic, Social, and Technological
Political environmental factors Trading agreements Tax rules Employment regulation Environmental legislation Legal issues Economic environmental factors Recession Interest rates Exchange rates Rate of inflation Population wealth Growth of the housing market
Social environmental factors 'Green' behavior Eating habits Shifts in attitude Population demographics Attitudes to career
Technological environmental factors Emergence of new communications channels Improved production processes Advances in computing and the internet New technologies such as electric vehicles Automation Reduced cost of materials
Areas of Economics Monetary Policy - the control of the amount of money circulating in the economy to influence interest rates, savings, investments, inflation rates, and growth rate Public Finance - studies the economic impact of the government's monetary and fiscal policies International Economics - focuses on the global economy, specifically on international trade and business Economics of Labor - discusses the theory, state, and value of labor in a country's economy Industrial Organization - is primarily concerned with the structure of the market, the role of the government, and the regulations for monopolies Agricultural Economics - gives importance to the agricultural sector of the economy Econometrics - uses data, statistics, or mathematics to study the theories of economics Development Economics or Economic Development - studies the economic situation of developing countries such as those in Africa, Asia, and Latin America
1. Production scheduling
2. Sales forecasting 3. Market research
Baumol concludes that a managerial economist can become a far more helpful member of a management group by virtue of his studies of economic analysis, primarily because there he learns to become an effective model builder and because there he acquires a very rich body of tools and techniques which can help him to deal with the problems of the firm in a far more rigorous, a far more probing, and a far deeper manner.
A managerial economist makes an assessment of change in the consumer preferences, input prices, and related variables to make successful forecasts of their probable effect on the internal policies of the firm. They inform the management of a change in the competitive environment in which a firm functions, and suggest suitable policies for solution of problems like: What product and services should be produced? What inputs and production techniques should be used? How much output should be produced and at what prices should it be sold? What are the best sizes and locations of the new plant? When should the equipment be replaced? How should the available capital be allocated? A managerial economist has to evaluate changes in the macroeconomic indicators like national income, population, and business cycles, and their likely impact on the functioning of the firm. He also studies the impact of changes in fiscal policy, monetary policy, employment policy and the like on the functioning of the firm. These topics come under the purview of macroeconomics. Therefore, they deserve a separate treatment. The scope of managerial economics is restricted to microeconomics.