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Rajni Ranjan
Economy
The word economy comes
from a greek word for
one who manages a
household
Why Choices ?
Because human want, desires and
aspiration and limitless.
Resources are scarce.
- Natural resources
- Human resources
- Capital
- Entrepreneurship
People are gain maximisers.
Scarcity
Means that society has limited resources and
therefore cannot produce all the goods and
services the people wish to have.
Scope of Economics
Microeconomics : is the study of the
economic behaviour of the individual
consumer and producer and of individual
economic variables, i.e., production and
pricing of individual goods and services.
Scope of Economics
Macroeconomics deals with not individual
quantities, as such, but aggregates of
these quantities.
For example :
Not with individual income but national
income.
Not with individual price but with general
price levels.
Definition
Managerial Economics is the integration of
economic theory with business practice for the
purpose of facilitating decision making and
forward planning by management.
------- Spencer and Seigelman
Basics
Demand, production, cost, market
structure, profit, price.
INPUTS
OUTPUT
FIRM
INTERNAL
ISSUES
EXTERNAL
ISSUES
Macroeconomics Applies to BE
Issues related to macro variables
Issues related to foreign trade.
Issues related to government policies.
Basic concepts
Basically a study of variables cost,
demand, price etc.
Functional relationship is studied.
Y=f(X)
Let us say that Y = Sales
X = Advertisement Budget
Relationships
Study of managerial economcs is the
study of relationship basically we study
Demand Function D = f( Price )
Production Function TP = f( input)
Cost Function TC = f( output )
Year
Population
Sugar
Consumed
2000
10
40
2001
12
50
2002
15
60
2003
20
70
2004
25
80
2005
30
90
2006
40
100
CHAPTER 2
Demand
The term demand refers to the quantity
demanded of a commodity per unit of time
at a given time.
It also implies a desire backed by ability
and willingness to pay.
Demand Function
Activity :
If we analyse what are the factors that
effect the demand for cars ?
Law of Demand
The law of demand states that quantity of
a product demanded per unit time
increases when its price falls and
decreases when its price decreases
keeping all other factors constant.
D = f ( P)
Demand Schedule
Price per cup
Demand
Demand Schedule
Price
Per
Cup
(Rs)
Market Demand
Price
Market
Demand
10
12
12
20
16
28
20
10
36
24
12
44
Price Of
Commodity X
Price
Consumer Income- NG, LG, IG, ECG
Substitute and complementary products
Population
Credit facility
Consumer taste and preferences
National Income Distribution
Demonstration Effect
Price
Of X
(Px)
Quantity Demanded
of X (Qx)
Law of Supply
Market supply is the quantity of a
commodity that all firms producing and
selling it offer for a sale at a given price
per unit of time.
According to the law of supply there is a
positive relationship between the two.
Market equilibrium
Price 100 200 300 400 500 600
Demand - 80 55 40 28 20 15
Supply 10 28 40 50 55 60