Traditional Economics "Economics is the study of mankind in the ordinary business of life.

" Alfred Marshall "Economic is a social science concerned with allocation of scarce resources amon g competing ends." Lionel Robbins These definitions are now considered too restrictive and accordingly the subject has now been defined “as a social science which covers the actions of individual s and groups of individuals in the process of producing, exchanging and consumin g of goods and services.” Broadly speaking traditional economics can be divided into macro economics and m icro economics: Macroeconomics : it is concerned with the aggregate of individual economic decis ions. Keynesian theories, use aggregate demand to explain levels of unemploymen t and the business cycle ,were especially prevalent immediately after WWII. Microeconomics : it is concerned with the economic analysis of individuals ,firm s,and certain industries . Micro economics can be divided into further subfields as labor markets or welfare economics.

Managerial economics Need for managerial economics Businessman face many problems when they take up study of economics they find th e subject perplexing because economist have used certain technical terms to expl ain certain concepts which have unnecessarily complicated the fundamental princi ples. Even those economist who were engaged as consultants to business houses ha ve come to the conclusion that pure economic theory is not suited to their needs . They had never encountered any business problems in which their investigation was helped by any specific economic theorem. Empirical evidence, too has proved that the decision making process in business is at variance with the decision ma king process postulated in economic theory. In view of these facts ,therefore it is reasonable to expect that some suitable method of analysis should be develop or an altogether new type of theory propounded which may help us to understand the actual working of a firm. Economists, on the other hand, are of the opinion that businessman in general la ck an objective and scientific approach to economic problems. A business man thi nks too much in terms of symbols, such as initiative and enterprise, and substit ute’s opinion objective analysis. He adopts short–sighted and selfish tactics and id entifies the welfare of the economy as a whole with its own interest. The best a nalysis in the opinion of business man is one that starts by taking a position t hat favors him and then supported it with available data. Obviously this is dogm atic and contradictory to rational and scientific thinking. If we closely examine the above arguments and counter arguments, we will observe that some doubts of the economists are real and some are imaginary. In the same way some doubts of business man are valid and many others are based on falls pr emises. Managerial economics thus helps in creating a rapport between the business man a nd the economist by synthesizing economic theory and business practices to find a feasible solution for business problems. Thus Managerial economics is creates a vital link between the concepts of traditional economics and the models of dec ision making to create an different field of economics which is essential for fi rms to tackle their day to day challenges and.

evaluate business problems and opportuniti es with a view to arriving at an appropriate business decision. Brigham and James L." D.C. In addition to the knowledge inherited from economics. and industries and is sometimes a partial equilibrium analysis.” Eugene F. its interaction. it has created new methods of analysis. It is connected within only a part of economic organism. marginal revenue. 3. mathematics. Second. logic and tools of economic analysis that are used in the process of busi ness decision-making . managerial economics takes into account the traditional economic concepts of determinants of demand. Managerial economics can also be broadly defined as the study of economic the ories. Haugue “Managerial economics is the application of economic theory and methodology to bus iness administration practice.Pappas 1.Economic theories and techniques of economic analysis are applied to analyze business problems. demand theory etc. measurement of profit.” 2. behav ior of cost. decision theory. it serves as a tool course wherein certain economic theories. it presents a cumulative flow of analysis and synthesis in the form of integrated sets of concepts rather than a variety of divergent and haphazard vi ews. The economist p uts under the microscope to observe the details of its operation and develops th e theory about the determination of main quantities of the system. we can arrive to a conclusion that managerial economics integrates concepts and methods of many other branches of learning su ch as operations research. and macro e conomics and microeconomics. Managerial economics is not a part of economic theory but a separate branch b y itself. Micro economics and managerial economics Micro economics deals with problems of individuals. It bridges the gap between traditional theory and business practices by fitting into the classification of business administration in two ways. statistics. output of a specific commodity. However the main source of its main source of inspi ration is micro economics. measurement of profit . First. revenue and expend iture of a given firm. methods and techniques of analysis are covered for their later use in the functional area. such as the p rice of a particular product. firms. In developing a proper approach to decision sciences. In attaining a certain degree of maturity. pricing decisions an . determination and behavior. it has borrowed mate rial from other sciences and supplemented it with own observed facts and empiric al rules.Definition: "Price theory in the service of business executives is known as managerial econo mics. According to the above discussion. It is a discipline with its own principles and can be separated fro m other disciplines by consistent and clear cut definitions. it serves as an” integrating course combining the various functional areas ands showing How they interact with one another as a form attempts to achieve its goods. Managerial economics makes use of numerous concepts of mi cro economics such as marginal cost. It uses the tools and techniques of economics to analyze and solve business p roblems." Professor Watson "Managerial Economics is a fundamental academic subject which seeks to understan d and to analyze the problems of business decision making.

The basic purpose of the approach is to de velop a scientific model of the system which may be utilize for policy making. habits. statistics and economics.but it was not until the late 50’s that w e witnessed the emergence of sophisticated tools of mathematics and statistics w hich revitalized the subject. The decision theory is the outgrowth of the theory of consumer’s choice and has arisen out of utility maximization.materials and money . indifferen . Statistics helps a firm to measure the a bove factors with reasonable degree of accuracy and a sure basis for decision ma king.. changes in fiscal and monetary measures and variations in the level of busine ss activities) it has relevance to business decisions. Statistics Statistics is a very useful science in business activities because business runs on estimates and probabilities. both of which are harmful to his business interests. Decision making Decision making has been the central theme of management sciences and managerial economics for more than half a century . inventory control. Operational research Operational research deals with the complex problems arising out of management o f men. it serve s as a useful guide for devising business policies. fashion. The bulk of literature on the subject covers many disciplines requiring more than a modest knowledge of psychology. mat hematics. techniques and organizational structures. competition and purchasing power on the probable demand and the n proceed to adjust the output accordingly. General Price Index (GPI) and the level of employment etc. Macro economics and Managerial economics It is also related to managerial economics. decision theory and symbolic logic Managerial economics thus bridges the gap between abstract theory and managerial practices. It also makes a departure from the mainstream of economic theory. because it deals with the basic subdivision and aggregates of the entire economic system such as Gross national pro duct (GNP). If a person fails to do this he woul d either be erring on the side of over-stocking or under-stocking. specification and acceptance of materials. and thus utilizes those analytical tools that have proved their usef ulness in practice or are capable of improving business decisions in future .d capital budgeting. O perational research is helpful to managerial economics in the field of product d evelopment. machines . sociology. Statistics is used in business activities to de termine the demand for a particular product. analyze the impact of variations in taste. much of whic h is too simple in assumptions but too complicated in applications. input output analysis. The environment in which a business operates (the fluctuation ion national incom e. probability theory. It is a study of the way in which forms act and react in response to change in tastes. invento ry theory.Tools of operational re search re linear programming dynamic programming. marketing and demand analysis .it narrows down the gap between problems of logic and the problems of policy-making . inspec tion and quality control.

in the circumstance.4 million tonne per annum (‘mtpa’) Lanjigarh alumina re finery and progressively commissioned the first 250. Hence most of the followers o f this school are economic theorists. and their approach is heavily oriented to model building. Managerial economics is concerned with decision making at the level of the firm . for it concentrates on the multiplicity of goals and pervasiveness of uncertainty.The following steps should be followed for the pu rpose: Managerial economics is intimately related to the theory of decision-making. coupled with our fast response to the commodity cycle correction. It deals ma inly with the economic rationale policy-making because economic decisions are co stly . strong cash flow and significant non-recourse project financ e secured.2 million in FY 2009. we continue to remain confident about the future based on our low-cost po sition and track record of low capital cost project development. both of which play a significant role in managerial decision-making. Higher volum es and various improvements to enhance operational efficiencies have also reduce d unit operating costs. Yet it takes into account the background environment and the total situat ion of decision-making which are usually ignore by the classical theory. S urplus power has been sold in a power deficient state in order to maximise retur ns. EBITDA was US$1. without sacrificing the longer-term growth potenti al of our operations. We expect to commissi on most of our projects within budget and at. achieved full capacity y at the first line of the 1.000 tpa aluminium smelter at cannot ignore them.decisions have far reaching effects on the firm and are often not easy to make . it has to think twice before it leaps thoug h it does not deal with decision process or with organizational group-making dec ision. Zinc and Iron Ore businesses and cost reduction measures. de-bo ttlenecked operations at our Chanderiya and Debari zinc smelters. Our strong operational management teams are incentivised t o implement the innovative initiatives to enhance efficiency and achieve savings . it is recommended that the systematic efforts are made to arrive at the right decisions . Despite increased contribution from higher volumes and stable costs of productio n. at our Copper – Zambia operations we have achieved a sharp reduction in production costs from 292. or ahead of schedule. We have made excellent progress during the year with our expansion programme. the benefits of which we expect will continue to be seen next year. Nkana copp er smelter at KCM and partially shut down the BALCO Plant I aluminium smelter. Despite a tough business environment and a drop in commodities prices of our pro ducts. We also took proactive steps to tempo rarily shut down high cost operations at our MALCO aluminium smelter. For instance.612. With ve ry modest net debt. This allows us to continue to deliver profits and growth even at depressed commo dity prices.8 US cents per lb in the first half (‘H1 FY 2009’) of FY 2009 to approximately 140 US cents per lb in the month of March 2009. This helped us to miti gate the impact of a sharp fall in commodity prices in the second half (‘H2 FY 200 9’) of the year ended 31 March 2009 (‘FY 2009’). increase efficiencies a nd achieve better recoveries. our project expansion programme is well funded. has brought positive results in reducing ope rating costs in the third (‘Q3 FY 2009’) and fourth (‘Q4 FY 2009’) quarters of FY 2009. Example 1(Vedanta group) Operating performance was strong. These were achieved in line with our expected capex plan at just over US$3 billion in FY 2009. Our ongoing and rigorous cost reduction measures. We commissioned a zinc concentrator at the Rampura Agucha mine.000 tonne per annum (‘tpa’) phas e of the new 500. driven by record production in our Aluminium. Our app roach to costs has always been to optimise productivity.ce curves and behavior under risk and uncertainty. including non-cash inventory write- .

This deal would signal many new investments that would go to Africa. he added. and utilizes those analytical tools that have proved their useful ness in practice or are capable of improving business decisions in future .                       .9 billion and the balance $400 million f rom the total upfront payment would be done in a few days on completion of certa in formalities. Thus . The company has now 180 million subscribers in 18 Asian and African nations. But we will have full control and our own brand. followed by Vodafone (348 million). Example 2(Bharti airtel) Becoming the world s fifth largest mobile operator. we will have an unparalleled footprint in one of the faste st developing regions in the world. Bharti group Chairman Sunil Mittal said “the transaction is the largest ever cros s-border deal in an emerging market and will result in combined revenues of abou t $13 billion.downs of US$79 million.7 b illion. and gives executive access to their practical contributions that economic doctrines can make to policy-making . Africa strategy (Bharti airtel) Elaborating on Africa also makes a departure from the mainstre am of economic theory. Zain is the second largest operator a nd that is the only difference. he remarked. Zain has operations in 17 countries in the region and is claim ing to be the second largest operator after MTN. China Mobile is the world s largest mobile player with a subscriber base of 522 million. “There is no extra payment made for the settlement. Conclusion Managerial economics. Telefonica (206 million ) and American Movil (201 million). much of which is too simple in assumption but too complic ated in application. “There were compromises to be made (in MTN). “With this acquisition. Mittal said. Bharti has acquired Zain Telecom s operations in 15 African nations. Mr. Bharti s international operations in-charge Mano j Kohli said the company had set a target of 100 million subscribers and $5 bill ion revenues by 2012-13. The company does not see any problem with another small shareholder Econet Wireless in Nigeria. It n arrows down the gap between the problems of logic and the problems of policy-mak ing . At present. Sunil Mittal led Bharti Airt el has completed the acquisition of Zain Telecom s Africa operations for $10. He said Zain Africa would now be 100 per cent subsidiary of Bharti International . For completing the deal. excluding S udan and Morocco. Bharti paid $7. bridges the gap between abstract theory and manager ial practices. We are looking at more opportunities as we b uild more roll outs in Africa.

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