ECONOMIC ANALYSIS-

A FEW FUNDAMENTALS
DR. SK LAROIYA
UNIVERSITY OF DELHI
AND
AMITY BUSINESS SCHOOL
ECONOMIC ANALYSIS-
WHY IT IS A MUST FOR A PRACTICING
MANAGER ?
ECONOMIC ANALYSIS
MANAGERIAL ECONOMICS
BUSINESS ECONOMICS
MANAGERIAL ECONOMICS
IS THE INTEGRATION OF ECONOMIC THEORY
WITH
BUSINESS PRACTICE
FOR
THE PURPOSE OF
DECISION MAKING AND FORWARD PLANNING
BY THE MANAGEMENT
BASIC INGREDIENTS:

ECONOMICS PROVIDES A SET OF CONCEPTS

THESE CONCEPTS FURNISH THE MANAGER

WITH
TOOLS AND TECHNIQUES OF ANALYSIS
ECONOMIC ANALYSIS IS AN AID
TO
UNDERSTAND
BUSINESS PRACTICES
IN A GIVEN ENVIRONMENT AND THEREBY
MAKE BUSINESS DECISIONS WHICH ARE
PRIMARILY ECONOMIC IN NATURE
DECISION MAKING IS A BASIC FUNCTION OF
MANAGEMENT

ECONOMICS THEREFORE IS A VALUABLE

INPUT
IN A DECISION MAKING PROCESS OF
MANAGEMENT
WHAT IS ECONOMICS?

• OBJECTIVE FUNCTION
• LIMITED RESOURCES
• ALTERNATIVE USES
• OPTIMAL ALLOCATION OF RESOURCES
• FEASIBILITY AND OPTIMALITY
MICRO ECONOMIC ANALYSIS

MACRO ECONOMIC ANALYSIS

ECONOMIC ANALYSIS-

• STATIC
• COMPARATIVE STATIC
• DYNAMIC

ECONOMIC ANALYSIS IS THE BASIS OF

ECONOMIC POLICY
BUSINESS DECISIONS:

ESSENCE OF AN ECONOMIC DECISION IS THE

SOLUTION TO AN ECONOMIC PROBLEM

PROBLEM OF CHOICE

ECONOMIC DECISION MAKING

 NATURE OF DECISIONS:

• INTUITIVE AND SCIENTIFIC

• STRATEGIC AND TACTICAL
• DECISIONS UNDER VARYING DEGREES OF
UNCERTAINTY
MANAGEMENT FUNCTION THAT INVOLVES
STRATEGIC DECISIONS MAKING, IS CALLED
COORDINATING MANAGEMENT
MANAGEMENT FUNCTION THAT INVOLVES
ROUTINE WORK IS CALLED SUPERVISORY
MANAGEMENT
SCOPE AND STRUCTURE OF ECONOMIC ANALYSIS:

• DEMAND ANALYSIS-
-STRUCTURE OF DEMAND –
-SENSITIVITY OF DEMAND TO VARIOUS
PARAMETERS SUCH AS PRODUCT PRICE,
CONSUMERS’ INCOME, PRICES OF OTHER
PRODUCTS, ADVERTISEMENTS ETC.
-DEMAND FORECASTING
• COST ANALYSIS
• PRODUCTION ANALYSIS
• OBJECTIVES OF A BUSINESS FIRM
• PRICING AND OUT PUT DECISIONS UNDER
ALTERNATIVE MARKET STRUCTURES
• INVESTMENT ANALYSIS
• ECONOMIC POLICY FRAMEWORK
• NATIONAL INCOME AGGREGATES
• BUSINESS ENVIRONMENT
• MODELS OF INCOME DETERMINATION
• MONEY MARKET
• CAPITAL MARKET
• FOREIGN EXCHANGE MARKET
• FISCAL AND MONETARY POLICIES
 FUNDAMENTAL CONCEPTS:

• FUNCTIONAL RELATIONSHIPS
• DERIVATIVES AND RELATED CONCEPTS
• MARGINAL ANALYSIS
• CONCEPT OF TIME PERSPECTIVE
• OPPORTUNITY COST
• EQUILIBRIUM- STABLE AND UNSTABLE
• DISCOUNTING PRINCIPLE
• SCARCITY AND CHOICE
ROLE OF A BUSINESS ECONOMIST:
• NATIONAL AND INTERNATIONAL LEVEL STUDIES
• INDUSTRY LEVEL STUDIES
• PRODUCT LINE RESEARCH
• SALES FORECASTING
• ECONOMIC ANALYSIS OF COMPETING
COMPANIES
• PRICING PROBLEMS OF INDUSTRY
• CAPITAL PROJECTS
• PRODUCTION PROGRAMS AND ANALYSIS
• INVESTMENT ANALYSIS
• ADVICE ON TRADE, FOREIGN EXCHANGE
• ANALYSIS OF PREVAILING ECONOMIC TRENDS