Um19mb504 Unit I 1570166460137

Managerial
Economics
(UM19MB504)
Unit I : Introduction
PES University
UM19MB504: Managerial Economics
 Course Objective: This course was designed to enable students to

understand the application of economic principles, particularly the
micro and macroeconomic concepts in business decision making.
Students will learn how markets work and how to make decisions as a
manager or as an individual operating in a market environment.
Course Credits: 2-1-0-2-3
2 lectures, 1 tutorial, and 2 hours of self study per week.

Instructors: Dr. Biplab Sarkar, Prof. Sowmya Muraledharan, and
Prof. Veena Venugopal
PES University - MBA - Managerial Economics (UM19MB504) 2

UM19MB504: Course Content
Unit Unit Title Total Hours of Teaching

Unit I Introduction 7 hours
Unit II Demand, Supply, and Equilibrium 9 hours
Unit III Demand Forecasting 7 hours
Unit IV Production Analysis in Different Market 10 hours

Structures
Unit V Macro-economic Business Environment 7 hours
Revision Classes 2 hours

UM19MB504: Reference Books

UM19MB504: Assessment Scheme and Schedule
Maximum The final

Syllabus Scheduled week
Marks weight
ISA I (CBT) Unit I and Unit II 6th week (Oct 21-26) 40 20

ISA II (CBT) Unit III and Unit IV 12th week (Dec 2-7) 40 20
Poster Presentation on
Assignment I 5th week (Oct 14-19) -- 10
Given Topic
10 Minute Video
Assignment II 10th week (Nov 18-23) -- 10
Presentation
ESA Complete Syllabus 16th week (January) 100 40

UM19MB504: Code of Conduct for Students

Managerial
Economics
(UM19MB504)
Session 1:
Managerial Economics – Meaning and Scope
PES University
Managerial Economics
Managerial Economics
Economics Business Aspects
What comes to our mind when we think of the word “economics”?

Economics
 A social science that studies how individuals, firms, governments,

and nations make choices on allocating scarce resources to satisfy
their unlimited wants.
 Scarce Resources – resources at the disposal ; which have alternative
uses
 Unlimited Wants – Satiating
 Choice – Decision Making
 Derived from Greek word “oikonomikós” which means “relating to

household management”

Evolution of Economics
Sir James Steuart (1767) in his famous book on “An Inquiry into the
Principles of Political Economy: Being An Essay on the Science of
Domestic Policy in Free Nations” explained that:
Economy in general [is] the art of providing for all the wants of a family, seeks
to secure a certain fund of subsistence for all the inhabitants, to obviate every
circumstance which may render it precarious; to provide every thing necessary
for supplying the wants of the society, and to employ the inhabitants ... in such
manner as naturally to create reciprocal relations and dependencies between
them, so as to supply one another with reciprocal wants.

Meaning of Economics
Meaning of economics can conveniently be

understood by studying the following three aspects
of an economy:
1)Wealth aspect
2) Welfare Aspect
3)Scarcity Aspect

Meaning of Economics: Wealth Aspect
Adam Smith (1776), defined Economics as the study of

wealth. (Book -- An Inquiry into the Nature and Causes
of the Wealth of Nations).
J B Say (1803), defines it as the science of production,

distribution, and consumption of wealth.
John Stuart Mill (1844), defines the subject in a social

context as, the science which traces the laws of such of
the phenomena of society as arise from the combined
operations of mankind for the production of wealth.

Meaning of Economics: Welfare Aspect
Alfred Marshall (1890), emphasized on

human activities or human welfare rather
than on wealth. (Book -- Principles of
Economics)
“Political Economy or Economics is a study of
mankind in the ordinary business of life; it
examines that part of individual and social action
which is most closely connected with the
attainment and with the use of the material
requisites of well-being.”

Meaning of Economics: Scarcity Aspect
Lionel Robbins (1932), “Economics is

the science which studies human
behaviour as a relationship between
ends and scarce means which have
alternative uses.” (‘An Essay on the
Nature and Significance of Economic
Science'
How do we understand Scarcity?

Concept of Scarcity
Marketing • May encounter scarcity of sales force

Manager at his command.
Finance • May face the scarcity of funds

necessary for expansion or renovate
Manager a program.
Finance • May not find enough revenue

resources to finance the necessary
Minister expenditure on plans and programs.

Technical Definition of Scarcity
1)In economic terms it can be termed as 'Excess of

Demand‘
2)Any time for anything if demand exceeds supply, that

thing is said to be scarce.
3)Scarcity is a relative term, demand in relation to its

supply determines the element of scarcity.

Examples of Scarcity
Unemployment • Scarcity of job.
Unsold Stock of
• Scarcity of buyers.
Inventory
Underutilised • Scarcity of power or other

Capacity of Firm support facilities.

Meaning of Managerial Economics
Joel Dean (1951), defines business

economics as “the use of economic
analysis in the formulation of business
policies”. (Book – Managerial Economics)
Milton L Spencer and Louis Siegleman

(1959), defined business Economics as “the
integration of economic theory with business
practice for the purpose of facilitating
decision making and forward planning of
management”.
Even J Douglas (1987), defines “business

economics is the application of economic
principles and methodologies to the
decision making process with in the firm
and organisation”.
James L Pappas and Mark Hirschey (1990)

defines “business economics applies
economic theory and methods to business
and administrative decision-making”.

Cristopor I Savage and John R Small opinioned that

“business economics is some thing that concerned with
business efficiency”.
Michael Baye, ”business Economics is the

study of how to direct scares resources in
a way that mostly effectively achieves a
business goal”.

• Business economics refers to the application of economic

theory and decision sciences to examine how an
organization can achieve its aims or objectives most
efficiently.

Scope of Managerial Economics
 Demand Analysis and Forecasting

 Production Function
 Cost Analysis
 Inventory Management
 Advertising
 Pricing System, Policies, and Practices
 Resource Allocation
 Profit Management
 Capital Management

Managerial
Economics
(UM19MB504)
Session 2:
Importance of Studying Economics for
Business Decision Making
PES University
Concept of Decision Making
 What should be the price of the product?

 What should be the size of the plant to be installed?
 How many workers should be employed?
 What kind of training should be imparted to them?
 What is the optimum level of inventories of finished
products, raw material, spare parts, etc?

Managerial Choices
• Output quantity • Production processes

• Output quality (input mix)
• Output mix • Input quantity
• Output price • Production location
• Marketing and • Production incentives

advertising • Input procurement

Decision Making
Decision making may be defined as the process

of selecting the suitable action from among
several alternative courses of action.

Basic Process of Decision Making
 Define the Problem
 Determine the Objective
 Identify Possible Solutions
 Select the Best Possible Solution
 Implement the Decision

Important Areas of Decision Making
 Selection of product
 Selection of method of production
 Optimum input combination
 Allocation of resources
 Determination of price and quantity
 Decision on promotional strategy
 Purchase and sale of assets
 Shut down decision

Nature of Managerial Economics

Nature of Managerial Economics

Importance of Studying Economics for Business
Decision Making
Spencer and Siegelman have described the importance of managerial

economics in a business and industrial enterprise as follows:
 Accommodating traditional theoretical concepts to the actual

business behavior and conditions
 Estimating economic relationships
 Predicting relevant economic quantities
 Understanding significant external forces
 Basis of business policies

Importance of Economics – A Case Study of
Toyota Prius
In 1997, Toyota Motor Corporation introduced the Prius in

Japan, and started selling it worldwide in 2001. The Prius, the
first hybrid car sold in the United States, can run off both a
gasoline engine and a battery, and the momentum of the car
charges the battery. The Prius was a big success, and within a
few years other manufacturers began introducing hybrid
versions of some of their cars. The design and efficient
production of the Prius involved not only some impressive
engineering, but a lot of economics as well.

Success Story of Toyota Prius: Economics Behind
1) How the consumer would react to the design and

performance of this product?
2) How strong would demand be initially, and how fast would
it grow?
3) How would demand depend on the prices that Toyota
charged.
4) Cost of manufacturing
5) Pricing strategy
6) Manufacturing and capital investment
7) Organizational issues
8) Government and regulatory policies – safety regulations

The Great Economist Debate:
How can their ideas help us
today?
London Business School
https://www.youtube.com/watch?v=HUi0KBkd3RQ

Managerial
Economics
(UM19MB504)
Session 3:
Management Decision Problems, Economic
Theory, and Decision Sciences
PES University
Management Decision Problems
• Ask what the decision maker needs to do

1
• Action oriented
2
• Focuses on symptoms
3

Management Decision Problem & Marketing
Research Problem
Management Decision Problem Marketing Research Problem
• Should a new product be • To determine consumer preferences

introduced? and purchase intentions for the
proposed new product.
• Should the advertising camping
be changed? • To determine the effectiveness of
the current advertising campaign.
• Should the price of the brand be
• To determine the price elasticity of
increased? demand and the impact on profits
of various levels of price changes.

Economic Theory

Micro and Macro Economics
Microeconomics Macroeconomics
• Microeconomics is the branch of economy • Macroeconomics is a branch of economics
which is concerned with the behavior of dealing with the performance, structure,
individual entities such as market, firms and behavior, and decision-making of an
households. economy as a whole.
• Microeconomics is the study of particular • Macro economics is the study of the whole
markets, and segments of the economy. It looks
at issues such as consumer behaviour, economy. It looks at ‘aggregate’ variables,
individual labour markets, and the theory of such as aggregate demand, national output
firms. and inflation.
• Preference relations, supply and demand, • National Output and National income,
opportunity cost. unemployment, inflation and deflation.
• Used to determine methods of improvement for • Used to determine an economy's overall
individual business entities. health, standard of living, and needs for
improvement.

Micro and Macro Economics
Microeconomics Macroeconomics
• Supply and demand in individual • Monetary / fiscal policy. e.g. what effect
markets does interest rates have on whole
economy?
• Individual consumer behaviour. • Reasons for inflation, and unemployment
e.g. Consumer preference theory
• Economic Growth
• Individual labour markets – e.g. • International trade and globalisation
demand for labour, wage
determination • Reasons for differences in living standards
and economic growth between countries.
• Externalities arising from
production and consumption • Government borrowing

What is Decision Science?
• Decision Science is the collection of quantitative techniques used to

inform decision-making.
1
• It include mathematics, statistics, simulation modelling, operations

research, cognitive and social psychology, and computer science etc..
2
• Decision science provides a unique framework for understanding

management decision problems.
3

Managerial
Economics
(UM19MB504)
Session 4:
Role and Responsibilities of a Managerial
Economist
PES University
Economist
• The role of the managerial economist is to assist

the management of the firm in decision making
and forward planning by using specialized skills
and techniques.
• Internal factors/ business operations
• External factors/ business environment

Economist: Business Operations
• What should be the production schedule and inventory

policies for the coming year?
• What should be the appropriate price and wages?
• How much cash will be available in the coming months
and how should it be invested?
Sales, forecasting, market research, analysis of
competiting firms, pricing problems, production
programmes etc.

Economist: Business Environment
• What is the trend in the economy? Is it showing signs

of recessions?
• What is the price trends of raw materials and finished
products in general?
• Is competition likely to increase or decrease with
reference to the materials produced by the company?
• What is the policies of the Government?

Cost-Benefit Analysis in Internal Decision
Making
• What changes in price need to be made and when?
• Investment plans
• Types of goods/services to be produced
• Inputs to be used
• Techniques of production to be employed
• Expansion/contraction of firm
• Allocation of capital
• Location of new plants
• Replacement of plant equipments
• Sales forecasting, inventory forecasting etc.

Advisory Role
• Advising the management on public

relations, foreign exchange, and trade.
• He guides the firm on the likely impact
of changes in Monetary and Fiscal Policy
on the firm’s functions.
• Assist the management in other decision
making.

Why Business Can
Be Good at Solving
Social Problems
Michael Eugene Porter, is an
American academic known for his
https://www.youtube.com/watch?v theories on economics, business
=0iIh5YYDR2o (16 minutes Video) strategy, and social causes. He is the
Bishop William Lawrence University
Professor at Harvard Business
School, and he was one of the
founders of the consulting firm The
Monitor Group (now part of Deloitte)
and FSG, a social impact consultancy.
He is credited for creating Porter's
five forces analysis, which is
instrumental in business strategy
development today.

Interviewing with McKinsey:
Case Study Interview
https://www.youtube.com/watch?v=nGzYzq3Wsos
(7 minutes Video)

Managerial
Economics
(UM19MB504)
Session 5:
Business Ethics
PES University
Business Ethics

Business Ethics: Broader Aspect

What is Business Ethics?
• Business ethics is the study of appropriate business policies and

practices regarding potentially controversial subjects including
corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities.
• The law often guides business ethics, but at other times business ethics
provide a basic guideline that businesses can choose to follow to gain
public approval.
• The concept of business ethics began in the 1960s as corporations
became more aware of a rising consumer-based society that showed
concerns regarding the environment, social causes, and corporate
responsibility.
What is Corporate Governance?
• Corporate governance is the combination of rules, processes or laws by which

businesses are operated, regulated or controlled.
• The term encompasses the internal and external factors that affect the
interests of a company’s stakeholders, including shareholders, customers,
suppliers, government regulators and management.
• The board of directors is responsible for creating the framework for corporate
governance that best aligns business conduct with objectives.
• Specific processes that can be outlined in corporate governance include action
plans, performance measurement, disclosure practices, executive
compensation decisions, dividend policies, procedures for reconciling
conflicts of interest and explicit or implicit contracts between the
company and stakeholders.

What is Insider Trading?
• The illegal practice of trading on the stock exchange to one’s own advantage
through having access to confidential information.
• Role of SEBI (Securities and Exchange Board of India) in the context of insider
trading cases in India – SEBI Act 1992 has given power to the SEBI to
investigate different types of insider trading cases.
• After formation of SEBI in 1992, it has undertaken 1228 cases for investigation
till 2008 out of which 1107 cases have been completed so far (SEBI Hand Book
of Statistics 1992-2008).
• Some selected insider trading cases – a) Tata Iron and Steel Company Case
(1992), b) DSQ Biotech Ltd. Case (1994), c) Reliance Industries Ltd.
(2001), d) Rakesh Agarwal vs. SEBI (2001), e) Satyam Computer Services
Ltd. Case (2009) etc.

What is Corporate Social Responsibility?
• Corporate social responsibility (CSR) is a self-regulating business model that

helps a company be socially accountable — to itself, its stakeholders, and the
public.
• By practicing corporate social responsibility, companies can be conscious of
the kind of impact they are having on all aspects of society including economic,
social, and environmental.
• Long before its initial public offering (IPO) in 1992, Starbucks was known for
its keen sense of corporate social responsibility, and commitment to
sustainability and community welfare.
• In 2010, the International Organization for Standardization (ISO) released a set
of voluntary standards meant to help companies implement corporate social
responsibility.

Why is Business Ethics Important?

How Have Business Ethics Evolved Over Time?
• Business Ethics in the ‘60s -- While young workers were idealistic and
wanted to make the world a better place, employers found their work ethic,
compared to that of previous generations.
• Major Events in the ’70s and ’80s – During the 1970s and 1980s, one event
shaped changes in business ethics: defense contractor scandals that became
highly publicized during the Vietnam War and a heightened sense of tension
between employers and employees.
• The ’90s and Environmentalism – The 1990s saw a rebirth of
environmentalism, social responsibility reaching new heights and graver legal
ramifications for ethical missteps.
• The Online Realm in 2000+ -- From the year 2000 forward, business ethics
have expanded to the online realm. The big ethical dilemmas of the 21st
century have mostly centered on cybercrimes and privacy issues.

Managerial
Economics
(UM19MB504)
Session 6:
Basic Concepts, Tools and Techniques of
Analysis
PES University
Approaches in Studying Economics
Positive Approach Normative Approach
• It deals with the description and • It is concerned with the prescription

the explanation of the economic or what ought to be done in certain
economic conditions.
behaviour.
• It is subjective and value based.
• It is objective and fact based.
• Example : The price of tomatoes
• It includes the development and should be Rs 20 a kilo to give
verification of economic theories. farmers a higher living standard and
to save the family farm. This is a
normative statement, because it
reflects value judgments.

Positive Approach Vs. Normative Approach
• What is unemployment rate • How much inflation should be

today? tolerated?
• How does a higher level of • Should higher taxes be levied on
unemployment affect inflation? the rich to help the poor?
• How does an increase in Road • Should we have different income
Tax or an in crease in tax on tax slabs or should we tax
petrol affects the automobile everyone equally?
industry?
• Should agricultural income be
taxed?

Fundamental Economic Questions
Positive Approach Normative Approach
• What goods and services are to • What goods and services should
be produced? be produced?
• How are goods and services to be • How should the goods and
produced? services be produced?
• For whom are goods and services • For whom goods and services
to be produced? Who share the should be produced? Or who
use of these goods and services? should share the use of these
Or Who gets the stuff? goods and services?

Commodities: Goods and Services
The things which are produced by the factors of production

are called commodities. Commodities can be divided into
physical goods and intangible services.

Attributes of Goods and Services
Attributes of Goods Attributes of Services
• Tangible products. • Intangible products.
• Product can be resold. • Reselling of services is unusual.

• Many aspect of quality and difficult
• Some aspects of quality are to measure.
measurable.
• Selling often a part of the service.
• Selling is distinct from production. • The service provider, not the
product, is transportable.
• Product is transportable.
• Services is often difficult to
• Often easy to automate. mechanise or automate.

Factors of Production
• Land – in economics, land comprises all naturally occurring resources whose

supply is inherently fixed, such as land, forest, minerels etc.
• Labour – all human resources, mental and physical.
• Capital – money and equipment
Entrepreneurship?
• Labour refers to any kind of human effort provided in the creation of goods
and services. Usually done in exchange for a monetary compensation (wage)
an upon instruction.
• Entrepreneurship is the designing, launching and running a process of
production in the creation of goods and services. Entrepreneurs are also part
of labour force.
Production and Consumption
• Production – the act of making goods and services

• Consumption – the act of using goods and services to satisfy
wants/needs

Tools and Techniques of Analysis
1
• Knowledge of Statistics
2
• Knowledge of Mathematics
3
• Operations Research Techniques
4
• Data Collection and Storage
5
• Data Extraction, Transformation, and Loading (ETL)

Knowledge of Mathematics
Linear and Non-Linear functions Differentiation

• The straight line: slope and intercept • Differentiation: slope of a curve, derivative, power
• Graph of a straight line from its equation rule of differentiation
• Applications: marginal functions - marginal
• Equation of the linear demand function , linear
revenue given the demand function - marginal cost
supply function, linear total cost function, and
equation from total cost function - average
linear total revenue function .
function - average revenue MR and AR for a
• Determining the coefficient of point elasticity of perfectly competitive firm and a monopolistic
demand. firm.
• Simultaneous equations: two equations two • Optimization for function of one variable:
unknowns - three equations in three unknowns – determining maximum and minimum turning
applications - equilibrium in the goods and labor points - economic application of maximum and
markets - market equilibrium for substitute and minimum points - max TR and a sketch of TR
complementary goods. function - Max and Min output for a firm over time
• Solving quadratic equations - applications: non- - profit maximization and price discrimination -
linear demand, supply and revenue function - profit maximization for a monopolist.
exponential and logarithmic functions. • Chain rule, product rule and quotient rules.
Simple Problems
• Determine which of the following points lie on the demand function,
Q = 50 – 0.5 P
Points (P, Q): A = (90, 5), B = (8, 10), C = (70, 15)
• The demand function is given by the equation P = 500 – 0.5Q
a) State and give a verbal description of the slope and intercepts.
b) What is the quantity demanded when P = 15.
c) Plot the demand function on a graph for 0 ≤ Q ≤ 200.
• Suppose that each tool box was sold for Rs. 350 irrespective of the
number of units sold.
a) Write down the equation of the total revenue function.
b) Graph the total revenue function.

Simple Problems
• Find the equations of the following straight lines:
a) A straight line passes through the point (2, 4) and has a slope of 1.
b) A straight line passes through the points (2, 4) and (8, 16).
• The demand and supply functions for a good are given as:
Demand function: Pd = 100 – 0.5Qd
Supply function: Ps = 10 + 0.5Qs
Calculate the equilibrium price and quantity algebraically.
• Given the simultaneous equations:
2X + Y – Z = 4
X+Y–Z=3
2X + 2Y + Z = 12
Find the values of X, Y, and Z algebraically.

Simple Problems
• Find the derivatives of each of the following:
Y = 3 X2 – 18 X + 34
• Solve the following equations:
25(10)2t = 208
38 + 12e - 0.5t = 208
log(x + 2) = 2.5
2ln(x) – ln(x+1) = 0

Simple Problems
• The population of a village was 753 in 1980. If the population grows according to the
equation:
P = 753e^0.03t
a) Graph the population equation for t = 0 (1980) to t = 30 (in 2010).
b) Estimate the population in 1990 and in 2000 algebraically.
c) In what year will the population reach 1750 persons?

Essential
Mathematics for
Economics and
Business
Teresa Bradley and Paul Patton

Managerial
Economics
(UM19MB504)
Session 7:
The International Framework of Managerial
Economics
PES University
Economics
• Many of the commodities we consume today are imported, and domestic
firms purchase many inputs abroad and sell an increasing share of their
products overseas.
• The international flow of capital, technology, and skilled labour has also
reached unprecedented dimension.
• There is a rapid movement toward the globalization of production,
consumption, and competition. Thus, it is essential to introduce a global
dimension in the study of managerial economics to reflect these
realities.

Economics
• As consumers, we purchase Japanese Toyotas and German Mercedes,
Italian handbags, and French perfumes, British scotch, Swiss chocolates,
Hong Kong clothes and Taiwanese hand calculators, American
computers, and Chinese toys.
• Often, we are not even aware that the products, or parts of them, are
made abroad.
• For example, an imported car-engine is used in an Indian made car and
many Indian brand name cars are entirely manufactured abroad.

The Rise of Global Corporations
Company Country Total Sales Foreign Sales Foreign Assets Foreign
(billion of (%) (%) Employment
dollars) (%)
Honda Japan 105.3 83 75 89
Siemens AG Germany 106.7 71 77 68
Hewlett- United States 104.3 67 45 65
Packwrd
Volkswagen Germany 160.3 75 49 47
Toyota Japan 230.6 63 54 39
General United States 172.7 53 46 55
Electric
Source: World Investment Report, 2009

The Indian Global Business Leader
• Indian business leaders are taking charge as global giants.
• Some of the world’s leading companies are now being run by CEOs of
Indian Origin. Such as,
1) Sundar Pichai, CEO of Google, appointed on August 10, 2015.
2) Shantanu Narayen, CEO of Adobe Systems.
3) Satya Nadella, CEO of Microsoft, appointed on February 4, 2014.
4) Sanjay Kumar Jha, CEO of Motorola Mobility
5) George Kurian, CEO of NetApp
6) Nikesh Arora, CEO of Palo Alto
7) Francisco D’Souza, CEO of Cognizants

Top 20 Countries by Highest
Exports
https://www.youtube.com/watch?v=E13GHwyCkhk

Top 15 Countries by Total
Exports (1960-2018)
https://www.youtube.com/watch?v=q2WeWOoTbag

Top 30 Asia, Pacific Countries
by Exports (1960-2018)
https://www.youtube.com/watch?v=8np6VWUNDN
w

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Managerial

 Course Objective: This course was designed to enable students to

2 lectures, 1 tutorial, and 2 hours of self study per week.

PES University - MBA - Managerial Economics (UM19MB504) 2

Unit Unit Title Total Hours of Teaching

Unit II Demand, Supply, and Equilibrium 9 hours

Unit III Demand Forecasting 7 hours

Unit IV Production Analysis in Different Market 10 hours

PES University - MBA - Managerial Economics (UM19MB504) 3

PES University - MBA - Managerial Economics (UM19MB504) 4

Maximum The final

ISA I (CBT) Unit I and Unit II 6th week (Oct 21-26) 40 20

PES University - MBA - Managerial Economics (UM19MB504) 5

PES University - MBA - Managerial Economics (UM19MB504) 6

Economics Business Aspects

What comes to our mind when we think of the word “economics”?

PES University - MBA - Managerial Economics (UM19MB504) 8

 A social science that studies how individuals, firms, governments,

 Choice – Decision Making

 Derived from Greek word “oikonomikós” which means “relating to

PES University - MBA - Managerial Economics (UM19MB504) 9

PES University - MBA - Managerial Economics (UM19MB504) 10

Meaning of economics can conveniently be

PES University - MBA - Managerial Economics (UM19MB504) 11

Adam Smith (1776), defined Economics as the study of

J B Say (1803), defines it as the science of production,

John Stuart Mill (1844), defines the subject in a social

PES University - MBA - Managerial Economics (UM19MB504) 12

Alfred Marshall (1890), emphasized on

PES University - MBA - Managerial Economics (UM19MB504) 13

Lionel Robbins (1932), “Economics is

How do we understand Scarcity?

PES University - MBA - Managerial Economics (UM19MB504) 14

Marketing • May encounter scarcity of sales force

Finance • May face the scarcity of funds

Finance • May not find enough revenue

PES University - MBA - Managerial Economics (UM19MB504) 15

1)In economic terms it can be termed as 'Excess of

2)Any time for anything if demand exceeds supply, that

3)Scarcity is a relative term, demand in relation to its

PES University - MBA - Managerial Economics (UM19MB504) 16

Unemployment • Scarcity of job.

Underutilised • Scarcity of power or other

PES University - MBA - Managerial Economics (UM19MB504) 17

Joel Dean (1951), defines business

Milton L Spencer and Louis Siegleman

Even J Douglas (1987), defines “business

James L Pappas and Mark Hirschey (1990)

PES University - MBA - Managerial Economics (UM19MB504) 19

Cristopor I Savage and John R Small opinioned that

Michael Baye, ”business Economics is the

PES University - MBA - Managerial Economics (UM19MB504) 20

• Business economics refers to the application of economic

PES University - MBA - Managerial Economics (UM19MB504) 21

 Demand Analysis and Forecasting

PES University - MBA - Managerial Economics (UM19MB504) 22

 What should be the price of the product?

PES University - MBA - Managerial Economics (UM19MB504) 24

• Output quantity • Production processes

• Output mix • Input quantity

• Output price • Production location

• Marketing and • Production incentives