GC-03 ECONOMIC ANALYSIS OF

DECISION MAKING

Unit I-Managerial Economics

Swati Chaturvedi- PU/09-22

 Some related terms
 Economy

 Economics

 Microeconomics

 Macroeconomics

 Managerial economics
 ECONOMY
 1 : the structure or conditions of
economic life in a country, area, or
period also : an economic system.

 2a : thrifty and efficient use of material

resources : frugality in expenditures
also : an instance or a means of
economizing : saving.
Economy
Indian economy is…….?
Sectors of the economy
ANY OTHER
WHICH MIGHT
BE MISSING?
 Economics

Alfred Marshall a leading 19th-century English economist defined economics

as

“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 wellbeing”

English economist Lionel Robbins defined economics as

“the science which studies human behaviour as a relationship between (given) ends

and scarce means which have alternative uses.” 

Canadian-born economist Jacob Viner: defined economics as

“ economics is what economists do”

 Microeconomics
Microeconomics is a part of economics that contemplates the
traits of the decision-makers within the economy such as
households, individuals, and enterprises.
 NEEDS: are the basic necessities that a person must have in order to
survive

e.g. food, water, warmth, shelter and clothing

 WANTS: are the desire that people have

e.g. things that people would like to have, such as bigger homes,
iphones, etc.
 Microeconomics-concepts
 Price mechanism:  the investigation of how prices are determined in the
marketplace. Manufacturers and customers initiate forces that we term
them as supply and demand accordingly, and it is their interaction within
the marketplace that devises the price mechanism.
 Demand: Demand is initiated by the needs of the customers. The nature of
demand incurs much to the basic worth that customers discern the goods or
services to possess. The degree of demand for the goods or services is
determined by various factors such as
 Price of goods or services
 Price of other goods and services, alternatives, and contingents
 Emoluments
 Tastes and proclivity
 Expectations
 Microeconomics-concepts
Supply: Supply refers to the number of goods and services
offered to the marketplace by the manufacturers. We can
delineate the association between the quantity demanded and
the price. We can also contemplate the link between the
quantity supplied and the price.
 Macroeconomics
 Macroeconomics is a branch of economics that

 Deals with the economy at a massive scale and several issues of an economy are
considered.

 When one speaks of the issues that an economy confronts, inflation,

unemployment, increasing tax burden, etc., are all contemplated in
macroeconomics. It focuses on large numbers.

 It studies the association between various countries regarding how the policies of
one nation have an upshot on the other. It circumscribes within its scope, analysing
the success and failure of government strategies.
 Macroeconomics -concepts
 Nature of economy i.e. A capitalist/socialist nation

 . The attributes of a capitalist nation are as follows:

  Liberty of customers to pick between goods and services.
  The privilege of individuals to set up a business to supply goods and services.
  There is a finite interference of the government.
   Market forces regulate the distribution of goods.

 What are the attributes of a socialist economy?

 Macroeconomics -concept
 Investment expenditure

 it is the money consumed towards charges to create investments. In other words,

it is the money that the family circle (households) and enterprises spend on
capital goods.

 It plays a decisive role in macroeconomic pursuit for business cycles and

economic enhancement in the long run. Investment expenditure is proficient of
creating additional income and fosters employment in a nation.

 the types of investments:

  Autonomous investment
  Financial investment
  Real investment
  Gross investment
  Net investment
 Macroeconomics -concept
 Revenue: Revenue is the total income of an entity through sale of goods and
proffering its services to the customers. Revenue can be operating or non-
operating. The significance of revenue and its acknowledgements is better
comprehended if we are well aware of the aspects that are contemplated while
deciding the GDP.

 The index of the economic health of a nation is measured through the GDP (gross
domestic product).
 Activity-Difference between Micro and
Macro Economics
Micro
Meaning
is the branch of Economics that is related to the
study of individual, household and firm’s
behaviour in decision making and allocation of
the resources. 
Area of Study
studies the particular market segment of the
economy
Deals with
with various issues like demand, supply, factor
pricing, product pricing, economic welfare,
production, consumption, and more.
Macro
is the branch of Economics that deals with the
study of the behaviour and performance of the
economy in total.
studies the whole economy, that covers several
market segments
with various issues like national income,
distribution, employment, general price level,
money, and more.
 Activity-Difference between Micro and
Macro Economics…contd.
Micro
Application
It is applied to internal issues
Scope
It covers several issues like demand, supply,
factor pricing, product pricing, economic
welfare, production, consumption, and more
Significance
It is useful in regulating the prices of a product
alongside the prices of factors of production
(labour, land, entrepreneur, capital, and more)
within the economy
Macro
It is applied to environmental and external
issues
It covers several issues like distribution,
national income, employment, money, general
price level, and more
It perpetuates firmness in the broad price level,
and solves the major issues of the economy like
deflation, inflation, rising prices (reflation),
unemployment, and poverty as a whole