me introduction new

5/20/2018 Me Introduction New

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Welcome to Managerial

EconomicsDr. Shylajan, C.S

Ph.D (MSE), PDF (IIM-C)

M:9440070524

Email: [email protected]


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Curriculum

Introduction to Economics

Demand and Supply Analysis Consumer Behavior Analysis

Production and Cost Analysis

Market Structure

Pricing Practices


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References

Microeconomics by ICFAI

Managerial Economics inGlobal Economy by DomenickSalvatore


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Introduction to

Managerial Economics


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What is the role of

Managers? To Make Decisions

On What?

What to produce?

How to produce?

For whom to produce?Whether to build a new plant?

Whether to close down a plant?

Whether to develop a new product?


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What is the role of

Managers?

Firm has limited resources

Manager has to make a choice

Manager has to analyze Costs andBenefits


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What is the role of

Managers? What is the anticipated objectives

of management?

Make Profit?

What is profit? Revenue - Cost


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What is the role of

Managers? The firms Sales Revenue depends on

what?

Demand for its product?

Price of the product?

What is Demand?


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What is the role of

Managers? By minimizing Cost, firm can

maximize Profit

Manager should know theMARKET STRUCTURE

Manager has to develop thePRICING STRATEGY for hisroducts


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Managerial Economics

focuses on Identifying problems

Identifying opportunities

Analyzing alternatives

Making choice from alternatives that arebest from the standpoint of the firm


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Overview

Scarcity and Economic problem

Economics

Production Possibilities

Opportunity Cost


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Overview

Fundamental Economic Questions

Micro Economics

Market, Command and Mixed Economies

Role of Government

Summary


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Scarcity and economic

problems

Source of any economic problem is

Scarcity of resources

For example,

PovertyUnemployment

Inflation etc


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Scarcity and economic

problems We have

Limited Resources

But Unlimited Wants


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Resources

Land Labour Capital

Entrepreneurship


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Decision making

Unlimited wantsScarce

ResourcesSociety makes choice


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Economics

How to allocate scarce resource inorder to satisfy unlimited wants

It is about choice and decision-making

It is about efficient allocation of scarceresource


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We have to make a Choice

We can spend our limited resource to produceManufacture goods

Or

Agricultural

Society has to decide what to produce


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Decision Making for

What? To maximize social welfare

Consumer (maximize satisfaction/utility)Firm (maximize profit)

Investor (maximize return on Invt)

Economy (achieve higher eco.growth)

By allocating scarce resources efficiently


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Economic Efficiency

means

Optimal production of goods and

services

Maximum output with minimum

cost


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We have limited resource

How do we allocate our resources toproduce manufactured goods and

Agricultural goods?


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Output peryear


A B C D

Manufactured

goods

160 120 80 0

Agriculturalgoods

0 40 80 160


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What it shows?

We can produce more of one good

only by producing less of theother good.


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And every choice you makehas Opportunity Cost

What is the next best alternative

sacrificed due to this choice?


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Then what is meant by

Opportunity Cost?

It is the best alternative sacrificed

for a chosen alternative


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Opportunity Cost

What is the opportunity cost ofgoing to college?

It is the money you would haveearned if you worked instead.


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Due to scarcity, every economicagents face Fundamental

Economic Questions!

What to produce?

How to Produce?

For whom to produce?


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What to produce?

Kind of goods and services

Agricultural goods, manufactured goods,services?

Nature of goods-necessities or luxurygoods

Quantity in each category


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How to Produce?

Techniques of production to be adopted

Labor intensive or capital intensive?

Decision depends on nature of economy


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For whom to produce?

Produce only for those who haveability to pay?

Health care services, for example


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Micro Economics

Study of how a singleindividual, household, firmor industry choose to

allocate scarce resource inorder to satisfy unlimitedwants


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Market Economy, CommandEconomy and Mixed Economy


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Market Economy

Market: A place or context in which buyersand sellers buy and sell goods, services andresources

Demand and Supply decide what toproduce, how to produce and for whom toproduce

Price gives the signal for producers andconsumers


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Command Economy

State owns the means of production(land, factories, financial institutions

etc)

Central planning authority takeseconomic decisions like what toproduce, how to produce and forwhom to produce

Prices are determined by govtauthorit


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Command Economy

Central Planning authority allocatesresources for each sector

agriculture,

industry,

service sector

Name any command economy?


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Mixed Economy

Both market economy and commandeconomy characteristics

Central planning authority takescrucial economic decisions.

Market mechanism also plays animportant role

Name an example of mixed economy?


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Role of Government in anEconomy

Produce

Distribute

Regulate

f


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Role of Government in anEconomy

Provide certain public goodssuch as law and order,defense, Roads etc

Ensure equity throughtaxation

Redistribute the resource to

the poor through subsidies


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Summary

Three fundamental economicquestions facing any economy

are..

Opportunity cost means.

The best option given up as a resultof choosing an alternative

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