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    Managerial economics uses tools to analyze economic variables and their interrelationships. These tools include marginal analysis and optimization techniques. Economic variables like supply, demand, prices, and costs are interdependent and subject to change. Models use bivariate or multivariate analysis to understand relationships between one or more dependent and independent variables, though real-life data is complex. Optimization techniques help managers maximize profits by understanding how profits change in response to price, cost, sales and other factors.

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    Managerial economics uses tools to analyze economic variables and their interrelationships. These tools include marginal analysis and optimization techniques. Economic variables like supply, demand, prices, and costs are interdependent and subject to change. Models use bivariate or multivariate analysis to understand relationships between one or more dependent and independent variables, though real-life data is complex. Optimization techniques help managers maximize profits by understanding how profits change in response to price, cost, sales and other factors.

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    4 views25 pages

    Managerial

    Uploaded by

    ramandeepkaur
    Managerial economics uses tools to analyze economic variables and their interrelationships. These tools include marginal analysis and optimization techniques. Economic variables like supply, demand, prices, and costs are interdependent and subject to change. Models use bivariate or multivariate analysis to understand relationships between one or more dependent and independent variables, though real-life data is complex. Optimization techniques help managers maximize profits by understanding how profits change in response to price, cost, sales and other factors.

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    of 25

    Managerial Economics

    Tools of Analysis
    Tools
    of
    Analysis
    1. Economic Variables:
    • Variable: anything that is subject to change

    • Economic variables: supply, cost, prices, demand, labour, interest rate,


    etc.

    • Interrelatedness and interdependence


    • D depends on P, and P depend on D
    • Borrowing depends on r, and r depends on borrowing
    • Profit depends on price, cost and sales
    Limitation
    • Large data/long series in real life
    • Cannot be expressed simply in a table or
    diagram
    • No precise decisions
    • Bi-variate:
    one dependent variable, and one independent variable
    • Multi-variate:
    One dependent, several independent variables
    2. Marginal Analysis
    Example:
    3. OPTIMISATION
    Profit Maximisation:

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