1 / 29

MANAGERIAL ECONOMICS

MANAGERIAL ECONOMICS. Presented by MUDDADA SANTOSHI PAVANI M.Tech , Assistant Professor DEPARTMENT OF AUTOMOBILE ENGINEERING VISAKHA INSTITUTE OF ENGINEERING & TECHNOLOGY. Managerial Economics. Branch of Economics .

heavynne
Download Presentation

MANAGERIAL ECONOMICS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MANAGERIALECONOMICS Presented by MUDDADA SANTOSHI PAVANI M.Tech, Assistant Professor DEPARTMENT OF AUTOMOBILEENGINEERING VISAKHA INSTITUTE OF ENGINEERING & TECHNOLOGY

  2. ManagerialEconomics • Branch ofEconomics. • ‘Managerial Economics is the study of Economic Theories, Principles and Concepts which is used in Managerial DecisionMaking.’ • ‘Managerial Economics is the Application of various Theories, Concepts and Principles of Economics in the BusinessDecisions.’ • It also Includes ‘The Application of Mathematical and Statistical tools in Managementdecisions.’

  3. ManagerialEconomics Application of Mathematical And Statisticaltools Economic Theories, Principles and Concepts. Applicatio n Managerial Decision Making. Applicatio n

  4. ManagerialEconomics ManagerialDecisions Choice ofproduct Choice of productionmethod Choice of price,Etc… Application of Analytical tools such as, Mathematicaland Statisticaltools Application of Economicconcepts, Theories and Principles in decisionMaking Managerial Economics ‘Application ofEconomic Concepts, Theories and Analytical tools to find solutions for managerial problems.

  5. ManagerialEconomics • Economics. • Theories • Principles • Concepts • DecisionMaking. • Selection of best alternative out of various possible alternatives. • Risk& Uncertainty

  6. Economics Economics: ‘A Queen of Social Sciences’ Economics ‘OIKOS’ ‘NOMOS’ (GreekWords) ‘OIKOS’ ‘NOMOS’ ‘HOUSE’ ‘MANAGEMENT’ According to J.S. Mill Economics is “The practical science of production and distribution ofwealth.” ‘It is the study of How people produce andspend income.’

  7. Economics It talks about ‘Economic Activity’ and ‘EconomicProblem’. ‘It is the Study of Logic choice between Scarce resources and unlimitedwants’ ‘Economics is to get the answer to the basic questions of an economy such as, What to produce?, How to produce? And for whom toproduce?’ ‘Economics is the social science that is concerned with the production, distribution, and consumption of goods and services.’

  8. Economics There are TwoBranches Micro Economics: Means ‘Small’or ‘Individual’. The term ‘MICRO’ comes from the Greek word ‘MIKROS’ Which means ‘Small’ or‘Individual’. Macro Economics: Means ‘Group’ or‘Whole’. The term ‘MACRO’ comes from the Greek word ‘MAKROS’ Which means ‘Large’ or ‘Whole’.

  9. MicroEconomics • Micro Economics: ‘It is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particularindustries.” • Some of the theories which come under Micro Economics, • –Theory of Individual/MarketDemand. • –Theory of Production andCost. • –Theory of Markets andprice. • –Theory of profit,Etc…

  10. MacroEconomics • Macro Economics: ‘It deals not with individual quantities as such but with aggregates of these quantities, not with individual incomes but with national income.’ • Some of the theories which come under MacroEconomics, • Theory of total output and employment. • General pricelevel. • Theory ofInflation. • Theory of tradecycles • Economic growth,Etc…

  11. Difference between Managerial Economics and Economics Economics Comprehensive andwider scope It has both Micro and Macroin nature It is both Normativeand positive science It is concerned with the formulation of theories and principles It discusses generalproblems ManagerialEconomics Narrow and limitedscope It is essentially Micro in nature and Macro inanalysis It is mainly a Normativescience 4.It is concerned with the application of theories and principles ofeconomics 5.It discusses Individualproblems

  12. Nature of ManagerialEconomics • Science as well as Art of decisionmaking. • It is essentially Micro in nature but Macro in analysis. • It is mainly a Normative science but positive in analysis. • It is concerned with the application of theoriesand principles ofeconomics. • It discusses Individualproblems. • It is dynamic in nature not aStatic. • It discuss the economic behavior of afirm. • It concentrates on optimum utilization ofresources.

  13. Scope of ManagerialEconomics Objectives of aFirm. Demand Analysis andForecasting. Production and costanalysis. Pricingdecisions. Profitmanagement. Capitalmanagement. Marketstructure. Inflation and economicconditions.

  14. Managerial economics andDecision Making • Decisionmaking: • Decision making on internalaffairs. • Decision making on externalaffairs. • Internal affairs talk oninternalenvironment which consists of internal factors such as, Production, Financial, Marketing and Human resource related decisions. • External Affairs talk on external environment which consists of external factors such as, PEST relateddecisions.

  15. DecisionMaking • Uncertainty: • Nothing can be expectable because of the constant changes in the environment both internally as well asexternally. • Risk: • It is the situation which comes underuncertainty.

  16. Decision??????????????? How to takedecision???????????? By using…. EconomicModels

  17. EconomicModels Economic model is the structural and scientific method of constructing or developing Solutions by using basic economic principles, concepts, theories and Quantitative techniques such as mathematical and statisticaltools.

  18. Conclusionfor decisions. Evaluatingresults Testing of Hypothesis Analysis of data using Basic Principles of economics and Quantitative Techniques. Datacollection Formulationof hypothesis Definingthe problem Steps toconstruct EconomicModels

  19. Basic Principles of Managerial Economics Opportunity costprinciple. Marginalism principle. Equi-marginalism principle. Incrementalprinciple. Time perspectiveprinciple. Discountingprinciple.

  20. Opportunity CostPrinciple Choice involvessacrifice. The cost involved with thesacrifice Itisthecostofannext bestopportunity which is lost will be called as Opportunitycost. Ex: 100 Rs can be used for purchasing book or eating in pizza corner or purchasing of stationeries. Now the cost of purchasing book is alsoinclude the cost of ‘Eatingpizza.’

  21. Opportunity Cost inManagement A Production possibilitycurve C X C1 Y X O D D1 B

  22. MarginalismPrinciple Marginalcost and Marginal profit/benefit Marginal cost is the cost which incurred to produce the next or one moreunit. Marginal Revenue is the benefit which gets by producing one more or nextunit. Cost will be less and benefit will bemore.

  23. MarginalismPrinciple • Marginal cost (MC)= (TC)n -(TC)n-1 • Marginal Revenue(MR)=(TR)n –(TR)n-1 • DecisionRule: • MR >MC…..MR=MC…..MR<MC

  24. Equi-marginalismPrinciple • Allocation of scarce resources on different alternative uses should be equallydistributed. MPa = MPb =MPc=MPd Or i.e.. MPa= MPb = MPc = COPa COPb COPc MPd COPd.

  25. IncrementalPrinciple • Incremental principle gives an idea to increase the production not only with one more product it could be any quantity till the profit exists. • According to this principle profit can be existed either by increasing sales or total revenue or by decreasing totalcost • DecisionRule, • i.e. TC<TR……TC=TR……TC>TR

  26. Time PerspectivePrinciple • According to the principle all decisions should be under two formats i.e. short run and long run, Because of the decisionscharacteristics. • So each decision should be made in Short run basis as well as long runbasis. • According to short run decision the long run decision will getchange.

  27. DiscountingPrinciple • According to this principle, if a decision affects costs and revenues in long-run, all those costs and revenues must be discounted to present values before valid comparison of alternatives is possible. This is essential because a rupee worth of money at a future date is not worth a rupee today. Money actually has timevalue.

  28. DiscountingPrinciple • This could be understood using theformula, • FV = PV*(1+r) t And • PV = FV/ (1+r)t • Where, FV is the future value, PV is the present value, r is the discount (interest) rate, and t is the time between the future value and presentvalue.

  29. Quantitative Techniques usedin ManagerialEconomics • Variables • Functions • Schedules • Graphs • Derivatives • Differentiation • Integration etc…

More Related