Professional Documents
Culture Documents
Lecture 01 PDF
Lecture 01 PDF
Lecture 01 PDF
Session Outline
What is Economics
What is Managerial economics
Economics and Managerial Decision Making
Review of Economic Terms
Economic Rationality
Prof. Trupti Mishra, School of Management, IIT Bombay
What is Economics?
The word Economy derived from the Greek word okios
which means household.
What is Economics?
Human wants are unlimited
Resources available to satisfy these wants are scarce / limited
People wants to maximize their gains
What is Economics?
Economic agents / society have some economic problems
because of scarcity of resources
They need to choose scarce resources among alternatives
(scarce resources) based on choice and valuation of
alternatives
Trupti Mishra
Prof. Trupti
Mishra,School
School of
IIT Bombay
Prof. Trupti
Mishra,
ofManagement,
Management,
IIT Bombay
What is Economics?
Thus economics is the study of how economic agents or
societies choose to use scarce productive resources that have
alternative uses to satisfy wants (needs) which are unlimited
and of varying degree of importance
Trupti Mishra
What is Microeconomics?
Study of economic phenomena at micro level i.e. individual and
firm level
Managerial Economics
The Manager
A person who directs resources to achieve a stated goal.
Trupti Mishra
Economics
The science of making decisions in the presence of scarce
resources.
Trupti Mishra
10
Trupti Mishra
11
Trupti Mishra
12
Decision Sciences
Mathematical Economics
Econometrics
MANAGERIAL ECONOMICS
Application of economic theory
and decision science tools to solve
managerial decision problems
OPTIMAL SOLUTIONS TO
MANAGERIAL DECISION PROBLEMS
Trupti Mishra
13
14
15
16
Trupti Mishra
17
18
Trupti Mishra
19
Trupti Mishra
20
Coca Cola and Pepsi Co -Worlds two major soft drink manufacture
Manufacture only Concentrate, ships to network of bottlers
1999, Pepsi bottling group following Coca Cola bottling Company
November 1999: Coca Cola announced increase it the price of
concentrate by 7%, later Pepsi had the similar announcement.
Trupti Mishra
21
22
23
Trupti Mishra
24
Trupti Mishra
25
Basic Assumptions
Ceteri paribus
Rationality
Trupti Mishra
26
Ceteri paribus
Ceteri paribus is a Latin phrase that means all variables other
than the one being studied are assumed to be constant.
Literally ceteris paribus means other things being equal
Trupti Mishra
27
Economic Rationality
Trupti Mishra
28
Economic Rationality
Economics assume rationality on the parts of its subject like
consumer, producer and seller.
Economic rationality means economic agents see feasible,
known and alternative course of action, rank them on priority
and choose the one which is highest in ranking order.
Trupti Mishra
29
30
31
32
Trupti Mishra
33
34
35
37
Trupti Mishra
38
Trupti Mishra
39
40
41
Trupti Mishra
42
Session References