Economics for Managers

Why Economics

Early Version
Management Planning, organizing, directing, coordination, and controlling The function of getting things done through others Economics Household Management Nature and Scope of Wealth of Nations

The Economic versus Management approach to wealth creation (Primitive Perceptions)

ECONOMICS: Market allocates resources through price mechanism In economics there is no managementthe market resources efficiently role for allocates

Economics is the view of business activity from afar - the "market" perspective

The Economic versus Management approach to wealth creation (Primitive Perceptions)

MANAGEMENT:

Wealth is created through collaboration of people and technology Economy and markets (competitors), in management, are only part of the external forces or constraints in which management attempts to create wealth.

Management is popular world-wide in business, government, and non-profit organizations simply because it has been successful (Drucker).

Changed Version
Management - Drucker
Management is an economic activity by which resources are used to create wealth Economics-Robbins The study of choices made by people who

are faced with scarcity of resources

BUT
In the world of changing environment, the success depends on anticipation and cope with change. Micro Environment

Macro Environment

Business Environment

Analyzing & Responding to The Economic Environment

Economics
Personnel
Product Finance Political Legal Needs Consumer Price Wants Promotion Production
Monopoly Pure Competition

Social Culture

Acctg. place
Technology

Microeconomics Definition: The study of the choices made by households, firms, and the government, and how these choices affect the markets for all sorts of goods and services. Why study Microeconomics? 1. To understand how markets work 2. To make personal or managerial decisions 3. To evaluate the merits of public policies

Economic Rationality Towards..

Consumer-Optimize Satisfaction
Producer-Maximize Profit Seller-Sales Revenue

Keeping in mind the Objectives (ends) &

Constraints ( means)

Three fundamental questions of Economics

1. What goods and services do we produce? 2. How do we produce these goods and services? 3. Who consumes the goods and services that are produced?

Alternative Economic Systems

Market Economy
Command economy Mixed Economy

Economic Role of the Government

Product Mkts

Households

Government

Business Firms

Input Mkts

Marginalism
Scarcity- The root cause of economic

problem.

Opportunity Cost
A concept of choosing one alternative

among various. It gives the idea of next best alternative use.

Macroeconomics

Definition: The study of the nations economy as a whole

Why study macroeconomics? 1. To understand how a national economy operates 2. To understand the grand debates over economic policy 3. To make informed business decisions

Equilibrium
Partial equilibrium- It focuses on explaining

the determination of price & quantity in a given product or factor market when one market is viewed as independent of other markets. General equilibrium- It focuses equilibrium in all markets when prices & quantities of all products & factors are considered as variables.

Macro Economic Issues

What explains economic growth ? Why are some countries doing so much better than others ? What are the causes of persistent inflation? How can a country adjust to a balance of payments deficit ? How money supply in the economy regulated?

Macro Policies
Industrial Policy Industrial Licensing Policy MRTP Act Price Regulation and Distribution Control FERA - FEMA EXIM Policy

Monetary Policy
Fiscal Policy

From a managerial point of view, do these questions matter or should manager know about these policies?

YES

Because
Predicting the economic environment in which managerial decisions are taken is crucial to the success of an organization Promoting a general improvement in the quality of management could in itself be seen as a well thought of macroeconomic policy Managers should have their say in the establishment of the set of rules guiding macroeconomic policies A thorough understanding of the issues at stake is essential if they are to make a meaningful contribution to the debate

ECONOMIC ENVIRONMENT (Prosperity..Recession)

ORGANIZATIONAL MARKETING STRATEGY Product Price Promotion Phys. Distr.. MARKETING MANAGER DECISIONS - Risk Level - Capital Expenditures - New Product Creation

CONSUMER EXPECTATIONS - Income - Job Security - Product Prices

Choice & Real Cost

Unlimited consumer wants

Are greater than

the quantity of productive resources i.e factors of production ( land, labor, capital & entrepreneurship) available to produce goods & services. Goods & services are scarce Consumers cannot satisfy all their wants & have to make a choice. Any choice, being an act of selecting among alternatives, involves an opportunity cost or real cost.

Positive & Normative Economics

Positive approach is testable by

empirical evidence.
Normative approach states of policy

prescription.

Economic Analysis & Managerial Decisions

1.
2. 3.

4.
5. 6.

7.

Demand Forecasting Pricing & other Marketing Decisions Cost Analysis Investment Appraisal Specific Industry Analysis Govt Regulation & Policy Impact Analysis. Strategic Planning

Economics-Its Integration

Marketing Management

E C O N O M I C S

Financial Management

Business Strategy

Export Marketing

Operations Management

Business environment

Identifying profitable sectors

Break-even point

Understanding competition

Basis for international trade

The barriers

Understanding the trade agreements

Fluctuations in balance of payments

Thank You