Managerial Economics

Introduction

ME/CC/1-1-1

Management & Economics
• Why study economics as part of Management Syllabus?
– – – – Social Science and Natural Science Management as a Social Discipline Dealing with ‘human behaviour’ Action, Emotion, Drama

Businesses concerned with ‘economic behaviour of humans’
– – – – – – Buy Sell Work Produce Regulate Bargain

ME/CC/1-1-1

Economics and Operations Management
• What, why, how and when of production? • Optimizing Production –
– Consumer Behaviour – Demand Patterns, changing tastes and preferences –
• • • • Plant Capacities and capacity utilization Product and Process Design and costs – linked to product life-cycles Production Cycles Logistics

– Supply-side Economics and Market Structures –
• Selection of Raw Materials / Technology • Supply of key inputs – eg. Labour • Inventory management

• Understanding overall Business Environment
– Fiscal, Monetary and EXIM Policy

• Socio-economic aspects of Technology – Issues in Technology adoption
ME/CC/1-1-1

Economics - Definition
• A science that studies human behaviour as a relationship between multiple ends and scarce means which have alternate uses – Lionel Robbins
– – – – – Study of Human Behaviour Multiple ends Scarce means Means having alternate uses Central Problem – ‘Optimal Allocation’

Economics is a study of mankind in ordinary business of life; it examines that part of individual or social action which is most closely connected with attainment and with use of material requisites of well-being. Thus it is on one side a study of wealth, and on the other, and more important side, a part of study of man. – Alfred Marshall

ME/CC/1-1-1

Ethics and Economics
• Basic Assumption – ‘Rational human behaviour’ – defined as –
– Maximizing self-interest – Consistency in behaviour

Engineering based approach
– Techniques of achieving goals – Value Neutrality (Positivists) – Focus more on logistics rather than goals

Ethics based approach
– Goal Setting – Ideas of ‘right’ and ‘wrong’ (Normative) – What values govern ‘Choice’

ME/CC/1-1-1

History Of Economics – Some Milestones
• Ancient origins in writings of Kautilya and Plato. • Adam Smith – father of Modern Economics • The Classicals – Adam Smith, David Ricardo, J.S. Mill, Karl Marx • The Neo-classicals / Marginalists – Leon Walras, William Jevons, Alfred Marshall • Return to Welfare – Arthur Pigou, Vilfredo Pareto • Challenging the Neo-classicals – Pierro Sraffa, Joan Robinson • John Maynard Keynes • Monetarists – Milton Friedman • Growth Models – Roy Harrod, Joseph Schumpeter, Michael Kalecki, W. Arthur Lewis, Ragnar Nurkse • Social Choice – Kenneth Arrow, Gerald Debreau, Amartya Sen
ME/CC/1-1-1

Economics - Scope
• MICRO – economics –
– Deals with behaviour of single unit
• • • • Consumer Factors of Production Producer / Firm Market

– Definition of unit contextual – Central Concern – Understanding the ‘Building Blocks’ of economic system

MACRO – economics –
– Deals with Aggregates
• National Income and Expenditure • Savings and Investments • Fiscal and Monetary Policies

– Central Concern – Stability and Growth of economic system
ME/CC/1-1-1

Course Structure
Syllabus MICRO – economics Demand Analysis (4) Supply Analysis (2) Theory of Firm (3) MACRO – economics National Income (4) Business Cycles (4) Monetary Policy (3)

Revenue, Cost & Equilibrium Fiscal Policy (2) (3) Market Structures (3) Assessment External Sector (2)

90 marks internal –
– 5 assignments of 10 marks each = 50 marks – 1 Class Test = 30 marks – Class Participation – 10 marks
ME/CC/1-1-1

An Economist is like a Joker in a Pack of Cards Remains in the box during most games But there are times When this Joker has more power than all Aces put togethe

ME/CC/1-1-1

Sign up to vote on this title
UsefulNot useful