1. MANAGERIAL ECONOMICS
UNIT - 1

2. MEANING & DEFINITION
The word ‘Economics’ originates from the Greek work ‘Oikonomikos’ which can be divided into two parts:
(a) ‘Oikos’, which means ‘Home’, and
(b) ‘Nomos’, which means ‘Management’.
Adam Smith, considered to be the founding father of modern Economics, defined Economics as the study of the nature and causes of nations’ wealth or simply as the study of wealth.
According to Robbins, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.

3. NATURE Economics as a science: Economics as an art:
Collection of facts
Measurement
Explanation
Validity of laws
Economics as an art:
An art is a system of rules for the attainment of given ends- J.N.Keynes

4. SCOPE A. Economic Activities: Production Consumption Investment
Exchange
B. Economic systems:
Capitalization
Socialism
Mixed economy
C. Economic policies
D. Econometrics
E. Applied economics

5. LIMITATIONS Study of human activities only Study of rational man
Assumption based principles
Economic laws are not exact & universal
Economics is non controversial

6. Branches of Economics
Economics
Micro-economics
Macro-economics

7. MICRO ECONOMICS
Microeconomics is the study of individuals, households and firms' behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.

8. NATURE OF MICRO ECONOMICS
Following are some important characteristics of micro-economics-
Nature of analysis
Method
Scope
Application
Nature of assumptions

9. Theory of economic welfare
Scope of micro-economics
Commodity pricing
Demand theory
Supply theory
Factor pricing theory
Rent
Wages
Interest
Profit
Theory of economic welfare
What to produce?
How to produce?
When to produce?
For whom it is to be produced?

10. IMPORTANCE OF MICRO ECONOMICS
Individual behaviour analysis
Resource allocation
Price mechanism
Economic policy
Free enterprise economy
Public finance
Foreign trade
Social welfare

11. LIMITATION OF MICRO ECONOMICS
Unrealistic assumption
Inadequate data
Ceteris Paribus

12. MACRO ECONOMICS
Macroeconomics is the study of aggregates or averages covering the entire economy, such as total employment, national income, national output, total investment, total consumption, total savings, aggregate supply, aggregate demand, and general price level, wage level, and cost structure.
In other words, it is aggregative economics which examines the interrelations among the various aggregates, their determination and causes of fluctuations in them.
Macro economics is, that part of economics which studies the overall averages and aggregates of the system- By Boulding

13. NATURE OF MACRO ECONOMICS
Short run nature
Study of economics as a whole
A systemised and comprehensive body of thought
Reformed capitalism or neo-liberalism
A monetary economics
Mainly intituitional
Importance of state intervention
Crucial ole of investment
Comaritive static analysis
Based on firm empirical foundation
General theory
Role of consumption and national income

14. SCOPE OF MACRO ECONOMICS
Theory of national income
Theory of employment
Theory of money
Theory of general price level
Theory of economic growth
Theory of international trade
To understand the working of economy
In trade cycles
For understanding the behaviour of individual units

15. IMPORTANCE OF MACRO ECONOMICS
Helpful in understanding the functioning of an economy
Study of national income
Formulation of economic policy
Study of trade cycles
Changes in general price level
Economic growth
Helpful in the study of micro-economics
Estimate of material welfare
International comparisons
Economic planning

16. LIMITATION OF MACRO ECONOMICS
Dependence on individual units
Hetrogeneous units
Composition of structure of the aggregate is more important than the aggregate itself
Different effects of the aggregates
Limited application
Ignores the contribution of individual units

17. DIFFERENCES

18. MANAGERIAL ECONOMICS
Managerial economics is concerned with the application of economic principles and methodologies to the decision process within the organization. It seeks to establish rules and principles to facilitate the attainment of the desired economic goals of management.
McNair & Meriam calculate: “Managerial economics deals with the use of economic modes of thought to analyse business situation".
Joel Dean declares:"The purpose of managerial economics is to show how economic analysis can be used in formulating business policies".

19. ECONOMIC THEORY
MANAGERIAL ECONOMICS
BUSINESS MANAGEMENT

20. NATURE OF MANAGERIAL ECONOMICS
Micro economic in nature
Pragmatic
Related to normative economics
Conceptual in nature
Utilises some theories of macro-economics
Problem solving in nature
Deals with the application of economics
Study of allocation of resources
Interdisciplinary
Science
Art

21. SCOPE OF MANAGERIAL ECONOMICS
Demand analysis and forecasting
Cost and production analysis
Pricing decision, policies and practices
Profit management
Capital management
Analysis of business environment
Allied disciplines

22. Relationship of M.E. With Other Areas
Managerial economics and statistics
Managerial economics and mathematics
Managerial economics and accounting
Managerial economics and operations research
Managerial economics and theory of decision making
Managerial economics and economics

23. USES OF MANAGERIAL ECONOMICS
Integration of economic theory
Solution to practical business problems
Optimum use of scarce resources
Used for overall development
In decision making

24. Fundamental concepts of Managerial Economics
Opportunity cost principle
Principle of time perspective
Incremental principle
Discounting principle
Marginal principle
Scarcity principle
Equi-marginal principle
Principle of risk and uncertainty

25. Significance in Decision Making
Production decisions
Inventory decisions
Cost decisions
Marketing decisions
Investment decisions
Personnel decisions

26. Role of Managerial Economist
Analysis of External factors
Analysis of Internal factors
Specific functions

27. RESPONSBILTIES OF MANAGERIAL ECONOMIST
To make reasonable profits on capital employed
Successful forecasts
Knowledge of sources of economic information
His status in the firm

28. LIMITATION OF MANAGERIAL ECONOMICS
Inadequate Data Narrow Assumptions