Managerial Learnings from different Topics

Fortunate goal of a business or a firm is to earn profit or maximize profits. As

human wants are unlimited and means to satisfy them are scarce. Scarce means
have alternative uses. How to reconcile unlimited wants and limited resources,
is known as economic problem; and method to solve it is economics. These
scarce resources allocated optimally can help achieving a firm’s goal of
maximizing profits.
Managerial economics is the study of how to direct scarce resources in the way
that most efficiently achieves a managerial goal. Various important managerial
learnings are:
Demand and Supply Analysis:
 Operating business in the dynamic environment pushes managers to keep
analysis of demand and supply patterns.
 Managers should obtain or maintain appropriate inventory as per the
demand and supply.
 To keep the demand of the product constant or increasing, managers may
need to frequently change the prices as per the market forces. Without
constant analysis of demand and supply business may face loses due to
overprice, obsolete products, etc.
Elasticity:
 Elasticity concept is of vital importance to business managers – as it
helps to take various decision relating price and output.
 Elasticity can be defined as responsiveness of quantity to changes in
price. Therefore, a business should have complete idea of elasticity of
demand and supply of own product, substitutes and complementary.
 Business firms should have an idea of income elasticity of demand in
order to increase profits by increasing production capacity of those
products which have a high-income elasticity.
Impact of Government Regulations:
 Government regulations and policies protect the business firms by
different policies – like price floor, price ceilings, minimum wages, etc.
 Government formulates the policies to correct market failures due to
market forces, externalities, etc.
Production and Cost Analysis:
 Production and cost analysis help to achieve a firm’s major goal of
earning profits by achieving optimal scale of production.
 Cost analysis is highly important to managers in obtaining data about the
implicit cost of decision. Implicit cost is the opportunity cost of giving up
the best alternative uses of the resources.

Market Structure:
 Market structure tells you the level of competition or rivalry existing in
the market.
 Market structure shapes the marketing activities and helps in creating
competitive strategies to managers.