Meaning

of
Managerial
Economics
 Scope of
Managerial
Economics
 Demand Analysis and
Forecasting
- It is a technique for estimation of probable demand for a
product or services in the future.
- It is based on the analysis of past demand for that product
or service in the present market condition.
- Demand plays a vital role in the decision making of a
business.
- The ability to forecast demands allows the management to
capitalize on the opportunities available and strengthen
the market position of the firm.
 Cost And Production Analysis
- Cost Analysis is yet another function of Managerial economics. A
company makes a profit in two ways: by increasing the demand or
by reducing the cost. - A component of cost vulnerability always
exists since all the elements deciding expenses are not generally
known or controllable.
- By taking the help of managerial economics, the management of a
company identifies the factors causing a variation in costs.
- Production analysis is more of a physical exercise. It involves
examining the factors of production, also known as inputs, and
obtaining the best combination so as to get the least cost
combination.
- The topics covered during cost and production analysis are
production function, least-cost combination of factor inputs,
factor productiveness, returns to scale, cost concepts and
classification, cost-output relationship, and linear programming

Pricing Decisions,
Policies, and Practices
One of the most difficult and
complex responsibilities that any
management faces is capital
investment decisions.
Profit Management
Pricing is one of the most
important decisions that any
business must make in order to
achieve the necessary
profitability and growth.
Capital Management
Profit is the most important
indicator of a company's long-
term success or growth.
 Theory of
Demand
and Supply
Opportunity
Cost
The price of the next best
thing you could have done
had you not made your first
choice.
Incremental
Principle
A decision is profitable if
revenue increases more than
costs; costs decrease more
than revenues; increases in
some revenues are greater
than decreases in others; and
decreases in some costs are
greater than increases in
others.
 Equi- Marginal Principle
The Equi-marginal principle states that consumers will
choose a combination of goods to maximize their total utility.
The principle works on the basic idea of human nature. We tend
to compare the utility of two products and opt for those which
are efficient.
In a similar fashion, managers in a firm would want to utilize
all their resources to the same extent.
 Theory of Demand and Supply
The law of demand states that if
all other factors remain equal, the
higher the price of a good, the
fewer people will demand that
good. In other words, the higher
the price, the lower the quantity
demanded. The amount of a good
that buyers purchase at a higher
price is less because as the price of
a good goes up, so does the
opportunity cost of buying that
good.
Like the law of demand, the law
of supply demonstrates the
quantities sold at a specific price.
But unlike the law of demand, the
supply relationship shows an
upward slope. This means that the
higher the price, the higher the
quantity supplied. From the seller's
perspective, each additional unit's
opportunity cost tends to be higher
and higher. Producers supply more
at a higher price because the higher
selling price justifies the higher
opportunity cost of each additional
unit sold.
 Equi- Marginal Principle
The Equi-marginal principle states that consumers will
choose a combination of goods to maximize their total utility.
The principle works on the basic idea of human nature. We tend
to compare the utility of two products and opt for those which
are efficient.
In a similar fashion, managers in a firm would want to utilize
all their resources to the same extent.
CONGRATUATIONS