Class Test Questions and Answers
What is Managerial Economics? What is its relevance to Engineers/Managers?Ans
: Study of economic theories, logic and methodology for solving the practicalproblems of business. It is used to analyze business problems for rational businessdecisions. It is also called as Business Economics or Economics for firms.Relevance to engineers/Managers:Engineering and Management involves a lot of strategic decision making situations.Managerial economics helps in rational decision making. The various economic conceptshelp a manger to take right decisions. The scope of managerial economics is:I.
The selection of the production or the service to be produced.II.
The choice of production methods and resource combinationsIII.
The choice of best price and quantity combinationsIV.
Promotional strategy and activities.V.
The selection of location from which to produce.
How will you arrive at a business decision? What is a business environment?Ans:
Managerial Decisions/ Decision Analysis is the Process of selecting the best out of alternative opportunities, open to the firm.To arrive at a business decision, the four main phases are:1. Determine and define the objective.2. Collection of information regarding economic, social, political and technologicalenvironment and foreseeing the necessity and occasion for decision.3. Inventing, developing and analyzing possible courses of action.4. Selecting a particular course of action from the available alternatives.
comprises of the economic, social, political and technologicalenvironment.
What are the basic economical concepts? Briefly explain with the applications.Ans:
The basic/fundamental economic concepts are:i.
refers to changes in cost and revenue due to a policy change. Forexample - adding a new business, buying new inputs, processing products, etc. Change inoutput due to change in process, product or investment is considered as incrementalchange. Incremental principle states that a decision is profitable if revenue increases morethan costs; and if costs reduce more than revenues.
This concept is used while making a policy decision like adding a newbusiness, buying new inputs, processing products etc.