MANAGERIAL

ECONOMICS
BY CHANDER PARKASH
 CONTENT

• INTRODUCTION
• MICRO- ECONOMICS
• MACRO ECONOMICS
• DIFFFERNCES BETWEEN MICRO ECONOMICS AND MACROECONOMICS
• WHOLE PRICE INDEX
• CUSTMER PRICE INDEX
INTRODUCTION

• Economics is the social science studying the production, distribution and consumption of
goods and services. It is a complex social science that spans from mathematics to
psychology. At its most basic, however, economics considers how a society provides for
its needs.
MICRO ECONOMICS & MACRO ECONOMICS

• The part of economics concerned with single factors and the effects of individual
decisions.

• Marcoeconomics the branch of economics concerned with large-scale or general

economic factors, such as interest rates and national productivity.
 DIFFERNCE BETWEEN
BASIS FOR COMPARISON MICROECONOMICS MACROECONOMICS

Meaning The branch of economics that studies the behavior of an individual consumer, firm, The branch of economics that studies the behavior of the whole economy, (both
family is known as Microeconomics. national and international) is known as Macroeconomics.

Deals with Individual economic variables Aggregate economic variables

Business Application Applied to operational or internal issues Environment and external issues

Scope Covers various issues like demand, supply, product pricing, factor pricing, Covers various issues like, national income, general price level, distribution,
production, consumption, economic welfare, etc. employment, money etc.

Importance Helpful in determining the prices of a product along with the prices of factors of Maintains stability in the general price level and resolves the major problems of
production (land, labor, capital, entrepreneur etc.) within the economy. the economy like inflation, deflation, reflation, unemployment and poverty as a
whole.

Limitations It is based on unrealistic assumptions, i.e. In microeconomics it is assumed that It has been analyzed that 'Fallacy of Composition' involves, which sometimes
there is a full employment in the society which is not at all possible. doesn't proves true because it is possible that what is true for aggregate may not be
true for individuals too.
WPI AND CPI

• The two main inflation indicators — the Wholesale Price Index (WPI) and the Consumer Price Index (CPI)
— are moving in widely divergent directions. In the last eight months, while CPI (retail inflation) has
consistently moved upwards, the WPI (headline inflation) has dramatically contracted, leaving a substantial
7.8 percentage point gap between these two inflation estimates.
• The development has posed a problem for policy makers as while the movement of consumer prices makes
out a case for higher interest rates, the wholesale price movement demands urgent reduction in key interest
rate. While some amount of differences can be explained by the variation in base years, basket of items and
weights allocated to the individual items in the two indices, economists say that the divergence between the
two currently is massive and “ideally CPI should not be more than one percentage point of WPI on either
side”. Headline inflation in June was -2.4 per cent while the retail inflation was 5.4 per cent during the
month.
• Basket of wholesale goods : The wholesale price index (WPI) is based on the wholesale
price of a few relevant commodities of over 240 commodities available. The
commodities chosen for the calculation are based on their importance in the region and
the point of time the WPI is employed. For example in India about 435 items were used
for calculating the WPI in base year 1993-94 while the advanced base year 2004-05 and
which has now been planned to change to 2010-2011; uses 676 items.
ITEMS OF WHOLE PRICE INDEX
• Foods products
• Beverage, Tobacco
• Textiles
• Leather & Leather product
• Paper product & paper
• Chemicals & Chemicals product
• Rubber & Plastic items
• Non- Metallic Minerals product
• Basic
• Metals ,Alloys
• Machinery & Machine Tools
• Transport Equipment .
 CUSTOMER PRICE INDEX (ITMES)

• Hots oats cereal • Walking/Adventure Boots

• Soft continental cheese • Tablet Computer

• Television license
• Pineapple
• Chicken and chips
• Bag of branded chocolate sweets
• Baby Wipes
• Bag of sweet not chocolate
• Trade Union profession organism Subscription.
• Stouts 4 cans • Food Beverage
• Pan Tabaco and Intoxicant • Fuel & light

• clothing
HOW CALCULATE CUSTOMER PRICE INDEX

• Find the price of a single item that you purchased in the past. ...
• Find the current price of the same item. ...
• Divide the current price by the earlier price. ...
• Multiply the results by 100. ...
• Subtract 100 from the CPI to determine the change in prices.
 FORMULAES

Current Period Price

of the Basket

Consumer
× 100
Price Index =

Base Period Price of

the Basket
 Current Period
47.60
Price of the Basket
Consumer Price Index = × 100 = × 100 = 99.17
Base Period Price
48
of the Basket
TABLE OF CUSTOMER PRICE INDEX

RURAL URBAN
COMINBED
CPI 3.75 3.95 3.89
CFPI 1.85 2.42 2.01
 DEFINITION OF WHOLESALE
PRICE
• Price for bulk sale at the first stage of transaction
• Existing formula (WPI Base 2004-05) = Basic Price (ex
factory price, ex mine price or mandi price) + Excise Duty-
Trade discount
• New Formula (WPI Base 2011-12)= Basic price -Trade
Discount
• New WPI is not influenced by fiscal policy
 WEIGHTING STRUCTURE
• Shows relative importance of an item in a basket based on its
availability in the Indian economy as reflected by Net traded
value
• Net traded value = Gross Value of Output + Import – Export
Methodology
• Compilation of item level indices based on Geometric Mean
 ANNUAL GROWTH RATES (%)- WPI MAJOR
GROUPS BASE 2011-12 VIS-À-VIS 2004-05
16

Commodity
Base Year Weights (%) 2012-13 2013-14 2014-15 2015-16 2016-17
Groups

2011-12 100 6.9 5.2 1.2 -3.7 1.7

All
commodities
2004-05 100 7.4 6.0 2.0 -2.5 3.7

2011-12 22.618 11.4 9.9 2.2 -0.4 3.5

Primary
Articles
2004-05 20.118 9.8 9.8 3.0 0.3 4.7

2011-12 13.152 7.1 7.1 -6.1 -19.7 -0.1

Fuel & Power
2004-05 14.910 10.4 10.1 -0.9 -11.6 5.6

2011-12 64.231 5.3 3.0 2.5 -1.8 1.4

Manufactured
Products
2004-05 64.972 5.4 3.0 2.4 -1.1 2.6
 Inflation rate (%)
17
10.0

-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Apr 12
Jun 12
Aug 12
Oct 12
Dec 12
Feb 13
Apr 13
Jun 13
Aug 13
Oct 13
Dec 13
Feb 14

Inflation (2011-12)
Apr 14
Jun 14
Aug 14
Oct 14
Dec 14
Feb 15
COMMODITIES

Apr 15
Jun 15
Aug 15
Oct 15
Dec 15
Inflation (2004-05)

Feb 16
Apr 16
Jun 16
Aug 16
COMPARISON OF INFLATION RATES (%)- ALL

Oct 16
Dec 16
Feb 17
Mar
17
THANK YOU