unlL01Meanlng and lmporLance of

Managerlal Lconomlcs
W Meanlng
W Scope of Managerlal Lconomlcs
W lmporLance of Lhe sLudy of Managerlal Lconomlcs
W 1wo Ma[or luncLlons of a Managerlal LconomlsL
Meanlng and ueflnlLlon
W deals wlLh Lhe appllcaLlon of varlous economlc Lheorles prlnclples
concepLs and Lechnlques Lo buslness managemenL ln order Lo solve
buslness and managemenL problems
W lL deals wlLh Lhe pracLlcal appllcaLlon of economlc Lheory and
meLhodology Lo declslonmaklng problems faced by prlvaLe publlc
and nonproflL maklng organlzaLlons
Spencer and Selgelman Managerlal Lconomlcs ls Lhe lnLegraLlon of
economlc Lheory wlLh buslness pracLlce for Lhe purpose of faclllLaLlng
declslon maklng and forward plannlng by Lhe managemenL
Mc nalr and Merlam Managerlal economlcs ls Lhe use of economlc
modes of LhoughL Lo analyze buslness slLuaLlon"
8rlghman and appas " Lhe appllcaLlon of economlc Lheory and
meLhodology Lo buslness admlnlsLraLlon pracLlce"
!oel dean use of economlc analysls ln formulaLlng buslness and
managemenL pollcles ls known as managerlal economlcs"
Ieatures of Manager|a| Lconom|cs
1 lL ls more reallsLlc pragmaLlc and hlghllghLs on pracLlcal appllcaLlon of varlous
economlc Lheorles Lo solve buslness and managemenL problems
2 lL ls a sclence of declslonmaklng lL concenLraLes on declslonmaklng process
declslonmodels and declslon varlables and Lhelr relaLlonshlps
3 lL ls boLh concepLual and meLrlcal and lL helps Lhe declslonmaker by provldlng
measuremenL of varlous economlc varlables and Lhelr lnLerrelaLlonshlps
4 lL uses varlous macro economlc concepLs llke naLlonal lncome lnflaLlon
deflaLlon Lrade cycles eLc Lo undersLand and ad[usL lLs pollcles Lo Lhe
envlronmenL ln whlch Lhe flrm operaLes
3 lL also glves lmporLance Lo Lhe sLudy of noneconomlc varlables havlng
lmpllcaLlons of economlc performance of Lhe flrm lor example lmpacL of
Lechnology envlronmenLal forces soclopollLlcal and culLural facLors eLc
6 lL uses Lhe servlces of many oLher sclences llke maLhemaLlcs sLaLlsLlcs
englneerlng accounLlng operaLlon research and psychology eLc Lo flnd soluLlons
Lo buslness and managemenL problems
cope of Manager|a| Lconom|cs
Cb[ect|ves of a I|rm
W roflL maxlmlzaLlon has been consldered as Lhe maln ob[ecLlve
MulLlple ob[ecLlves
economlc
soclal
organlzaLlonal
human and
naLlonal goals
All Lhe ob[ecLlves are deLermlned by varlous facLors and forces
corporaLe envlronmenL
socloeconomlc condlLlons and
naLure of power ln Lhe organlzaLlon and
exLernal consLralnLs under whlch a flrm operaLes
All oLher pollcles and programmes of a flrm revolve round Lhls ob[ecLlve
emand Ana|ys|s and Iorecast|ng
llrm ls producLlon unlL and followlng baslc problems have Lo be addressed by a flrm
whaL Lo produce
where Lo produce
for whom Lo produce
how Lo produce
how much Lo produce and
how Lo dlsLrlbuLe
So has Lo sLudy ln deLall Lhe varlous
deLermlnanLs of demand
naLure
composlLlon and
characLerlsLlcs of demand
elasLlclLy of demand
demand dlsLlncLlons
demand forecasLlng
cope of Manager|a| Lconom|cs
roduct|on and Cost Ana|ys|s
W LransformaLlon of lnpuLs lnLo ouLpuLs elLher ln physlcal or moneLary Lerms
W how ouLpuL ls Lo be produced by a flrm by employlng dlfferenL facLor lnpuLs ln
proper proporLlons
W goals of a flrm MaxlmlzaLlon of ouLpuL
roducLlon analysls deals wlLh
producLlon funcLlon
laws of reLurns
reLurns Lo scale
economles of scale
roducLlon cosL ls concerned wlLh esLlmaLlon of cosLs Lo produce a glven quanLlLy of
ouLpuL roducLlon and cosL analyslsglves prlorlLy Lo
CosL conLrols
cosL reducLlon
cosL cuLLlng and
cosL mlnlmlzaLlon
CosL analysls deals wlLh Lhe sLudy of varlous
cosL concepLs
Lhelr classlflcaLlon
cosLouLpuL relaLlonshlp
cope of Manager|a| Lconom|cs
r|c|ng ec|s|ons o||c|es and ract|ces
W rlclng declslon ls relaLed Lo flxlng Lhe prlces of goods and servlces
W rlce seLLlng ls one of Lhe mosL lmporLanL pollcles of a flrm
W amounL of revenue Lhe level of lncome and above all Lhe volume of proflLs earned by a flrm
dlrecLly depend on lLs prlclng declslons
So we have Lo sLudy
prlceouLpuL deLermlnaLlon under dlfferenL markeL condlLlons
ob[ecLlves and conslderaLlons of prlclng pollcles
prlclng meLhodspracLlces pollcles
prlce forecasLlng
markeLlng channel
dlsLrlbuLlon channel
sales promoLlon pollcles eLc
rof|t Management
success or fallure of lL ls measured ln Lerms of Lhe amounL of proflL lL ls able Lo earn
one has Lo sLudy
varlous Lheorles of proflL
emergence of proflL
funcLlons of proflL and
lLs measuremenL
proflL pollcles Lechnlques
proflL plannlng
proflL forecasLlng and
8reak Lven olnL eLc
cope of Manager|a| Lconom|cs
Cap|ta| Management
W Success of any buslness depends on adequaLe caplLal lnvesLmenL and lLs proper managemenL
W 8aslcally one has Lo sLudy Lhe
cosL of employlng caplLal and
Lhe raLe of reLurn expecLed from each and every pro[ecL
lL ls cosLbeneflL analysls
caplLal requlremenL
meLhods of caplLal moblllzaLlon
caplLal budgeLlng
opLlmal allocaLlon of caplLal
selecLlon of hlghly proflLable pro[ecLs
plannlng and conLrol of caplLal expendlLure eLc
|near rogramm|ng and the 1heory of Games
1he Lerm llnear means LhaL Lhe relaLlonshlps handled are Lhe same as Lhose represenLed by sLralghL llnes and
programmlng lmplles sysLemaLlc plannlng or declslonmaklng lL lmplles maxlmlzaLlon or mlnlmlzaLlon of a llnear
funcLlon of varlables sub[ecL Lo a consLralnL of llnear lnequallLles
lL offers acLual numerlcal soluLlon Lo Lhe problems of maklng opLlmum cholces
lL lnvolves elLher maxlmlzaLlon of proflLs or mlnlmlzaLlon of cosLs
Market tructure and Cond|t|ons
1he number of sellers and buyers Lhe naLure exLenL and degree of compeLlLlon eLc deLermlnes Lhe naLure of pollcles
Lo be adopLed by a flrm ln Lhe markeL
trateg|c |ann|ng
provldes a framework on whlch long Lerm declslons can be made
1wo Ma[or Iunct|ons of a Manager|a|
Lconom|st
1 ec|s|onmak|ng
a dellberaLe cholce made ouL of several posslble alLernaLlve courses of acLlon
afLer carefully conslderlng Lhem
process of selecLlng Lhe besL ouL of many alLernaLlve opporLunlLles or courses
of acLlon LhaL are open Lo a managemenL
1he baslc alm of Laklng a declslon ls Lo selecL Lhe besL course of acLlon whlch
maxlmlzes Lhe economlc beneflLs and mlnlmlzes Lhe use of scarce resources
of a flrm Pence each declslon lnvolves cosLbeneflL analysls
2 Iorward p|ann|ng
plannlng' lmplles a consclously dlrecLed acLlvlLy wlLh cerLaln predeLermlned
goals and means Lo carry Lhem ouL
A dellberaLe acLlvlLy
A programmed acLlon
lannlng ls concerned wlLh Lackllng fuLure slLuaLlons ln a sysLemaLlc manner