MANAGERIAL ECONOMICS
Course (Year/Semester) : MBA I Year I
Course Aim:
To enable students acquire knowledge to understand the economic environment of an
organization.
Learning Outcome:
Students should be able to understand the basic economic principles, forecast demand and
supply and should be able to estimate cost and understand market structure and pricing
practices.
Unit-I: Introduction to Managerial Economics
Introduction: Definition - Nature and Scope - ME as an Inter-disciplinary - Basic Economic
Principles - The Concept of Opportunity Cost - Incremental Concept - Scarcity - Marginalism
- Equi-marginalism - Time perspective - Discounting Principle.
Unit-II: Theory of Demand
Demand Analysis: Law of Demand - Movement in Demand Curve - Shift in the Demand
Curve
Elasticity of Demand: Types & Significance of Elasticity of Demand - Measurement
Techniques of Price Elasticity
Forecasting: Demand Forecasting and its Techniques - Consumers Equilibrium - Cardinal
Utility Approach - Indifference Curve Approach - Consumer Surplus.
Unit-III: Production and Cost Analysis
Production Analysis: Production Function - Production Functions with One/Two Variables -
Cobb-Douglas Production Function - Marginal Rate of Technical Substitution - Isoquants and
Isocosts - Returns to Scale and Returns to Factors - Economies of Scale.
Cost Analysis: Cost concepts - Determinants of Cost - Cost-Output Relationship in the Short
Run and Long Run - Short Run vs. Long Run Costs - Average Cost Curves - Overall Cost
Leadership.
, Unit-IV: Market Structure and Pricing Practices
Market Structures: Features and Types of different Competitive Situations - Price-Output
Determination in Perfect Competition - Monopoly - Monopolistic Competition and Oligopoly
- both the long run and short run;
Pricing: Pricing philosophy.
Unit-V: Macro Economics & Business
Macro Economics: Nature, Concept and measurement of National Income. Classical and
Keynesian approaches to Income, Employment and Investment.
Inflation: Types, causes and measurement of inflation. Philips curve, stagflation.
Trade Cycles: Causes - Policies to counter trade cycles.
REFERENCES:
D. M. Mithani, Managerial Economics, HPH.
Yogesh Maheshwari, Managerial Economics, PHI.
Sumitrapal, Managerial Economics Cases & Concepts, Macmillan.
H. Kaushal, Managerial Economics, Macmillan.
Managerial Economics ‘Craig H. Petersen, Pearson.
D.N. Dwivedi, Managerial Economics, Vikas.
UNIT-I
INTRODUCTION TO MANAGERIAL ECONOMICS
Imagine for a while that you have finished your studies and have joined as an engineer in a
manufacturing organization. What do you do there? You plan to produce maximum quantity of
goods of a given quality at a reasonable cost. On the other hand, if you are a sale manager, you
have to sell a maximum amount of goods with minimum advertisement costs. In other words,
you want to minimize your costs and maximize your returns and by doing so, you are practicing
the principles of managerial economics.
Managers, in their day-to-day activities, are always confronted with several issues such as how
much quantity is to be supplied; at what price; should the product be made internally; or whether
,it should be bought from outside; how much quantity is to be produced to make a given amount
of profit and so on. Managerial economics provides us a basic insight into seeking solutions for
managerial problems. Economics, as the name itself implies, is an offshoot of two distinct
disciplines: Economics and Management. In other words, it is necessary to understand what
these disciplines are, at least in brief, to understand the nature and scope of managerial
economics.
INTRODUCTION TO ECONOMICS
Economics is a study of human activity both at individual and national level. The economists of
early age treated economics merely as the science of wealth. The reason for this is clear. Every
one of us in involved in efforts aimed at earning money and spending this money to satisfy our
wants such as food, Clothing, shelter, and others. Such activities of earning and spending money
are called Economic activities”. It was only during the eighteenth century that Adam Smith, the
Father of Economics, defined economics as the study of nature and uses of national wealth’.
Dr. Alfred Marshall, one of the greatest economists of the nineteenth century, writes
“Economics is a study of man’s actions in the ordinary business of life: it enquires how he gets
his income and how he uses it”. Thus, it is one side, a study of wealth; and on the other, and
more important side; it is the study of man. As Marshall observed, the chief aim of economics is
to promote ‘human welfare’, but not wealth. The definition given by
Prof. Lionel Robbins defined Economics as “the science, which studies human behaviour as a
relationship between ends and scarce means which have alternative uses”. With this, the focus of
economics shifted from ‘wealth’ to human behaviour.
CONCEPTS OF MICRO AND MACRO ECONOMICS:
‘Economics’ is defined as the study of how the humans work together to convert limited
resources into goods and services to satisfy their wants (unlimited) and how they distribute the
same among themselves. Economics has been divided into two broad parts i.e. Micro Economics
and Macro Economics. Here, in the given article we’ve broken down the concept and all the
important differences between micro economics and macro economics, in tabular form, have a
look.
MICROECONOMICS
The term ‘micro’ means small. The study of an individual consumer or a firm is called
microeconomics (also called the Theory of Firm). Micro means ‘one millionth’.
, Microeconomics deals with behavior and problems of single individual and of micro
organization. Managerial economics has its roots in microeconomics and it deals with the micro
or individual enterprises. It is concerned with the application of the concepts such as price
theory, Law of Demand and theories of market structure and so on.
MACROECONOMICS
The term ‘macro’ means large. The study of ‘aggregate or total level of economic activity in a
country is called macroeconomics. It studies the flow of economics resources or factors of
production (such as land, labour, capital, organisation and technology) from the resource owner
to the business firms and then from the business firms to the households. It deals with total
aggregates, for instance, total national income total employment, output and total investment. It
studies the interrelations among various aggregates and examines their nature and behaviour,
their determination and causes of fluctuations in the. It deals with the price level in general,
instead of studying the prices of individual commodities. It is concerned with the level of
employment in the economy. It discusses aggregate consumption, aggregate investment, price
level, and payment, theories of employment, and so on.
Though macroeconomics provides the necessary framework in term of government policies etc.,
for the firm to act upon dealing with analysis of business conditions, it has less direct relevance
in the study of theory of firm.
Micro and Macro Economics are not contradictory in nature, in fact, they are complementary. As
every coin has two aspects- micro and macroeconomics are also the two aspects of the same
coin, where one’s demerit is others merit and in this way they cover the whole economy. The
only important thing which makes them different is the area of application.
MANAGEMENT
Management is the science and art of getting things done through people in formally organized
groups. It is necessary that every organisation be well managed to enable it to achieve its desired
goals. Management includes a number of functions: Planning, organizing, staffing, directing,
and controlling. The manager while directing the efforts of his staff communicates to them the
goals, objectives, policies, and procedures; coordinates their efforts; motivates them to sustain
their enthusiasm; and leads them to achieve the corporate goals.
Course (Year/Semester) : MBA I Year I
Course Aim:
To enable students acquire knowledge to understand the economic environment of an
organization.
Learning Outcome:
Students should be able to understand the basic economic principles, forecast demand and
supply and should be able to estimate cost and understand market structure and pricing
practices.
Unit-I: Introduction to Managerial Economics
Introduction: Definition - Nature and Scope - ME as an Inter-disciplinary - Basic Economic
Principles - The Concept of Opportunity Cost - Incremental Concept - Scarcity - Marginalism
- Equi-marginalism - Time perspective - Discounting Principle.
Unit-II: Theory of Demand
Demand Analysis: Law of Demand - Movement in Demand Curve - Shift in the Demand
Curve
Elasticity of Demand: Types & Significance of Elasticity of Demand - Measurement
Techniques of Price Elasticity
Forecasting: Demand Forecasting and its Techniques - Consumers Equilibrium - Cardinal
Utility Approach - Indifference Curve Approach - Consumer Surplus.
Unit-III: Production and Cost Analysis
Production Analysis: Production Function - Production Functions with One/Two Variables -
Cobb-Douglas Production Function - Marginal Rate of Technical Substitution - Isoquants and
Isocosts - Returns to Scale and Returns to Factors - Economies of Scale.
Cost Analysis: Cost concepts - Determinants of Cost - Cost-Output Relationship in the Short
Run and Long Run - Short Run vs. Long Run Costs - Average Cost Curves - Overall Cost
Leadership.
, Unit-IV: Market Structure and Pricing Practices
Market Structures: Features and Types of different Competitive Situations - Price-Output
Determination in Perfect Competition - Monopoly - Monopolistic Competition and Oligopoly
- both the long run and short run;
Pricing: Pricing philosophy.
Unit-V: Macro Economics & Business
Macro Economics: Nature, Concept and measurement of National Income. Classical and
Keynesian approaches to Income, Employment and Investment.
Inflation: Types, causes and measurement of inflation. Philips curve, stagflation.
Trade Cycles: Causes - Policies to counter trade cycles.
REFERENCES:
D. M. Mithani, Managerial Economics, HPH.
Yogesh Maheshwari, Managerial Economics, PHI.
Sumitrapal, Managerial Economics Cases & Concepts, Macmillan.
H. Kaushal, Managerial Economics, Macmillan.
Managerial Economics ‘Craig H. Petersen, Pearson.
D.N. Dwivedi, Managerial Economics, Vikas.
UNIT-I
INTRODUCTION TO MANAGERIAL ECONOMICS
Imagine for a while that you have finished your studies and have joined as an engineer in a
manufacturing organization. What do you do there? You plan to produce maximum quantity of
goods of a given quality at a reasonable cost. On the other hand, if you are a sale manager, you
have to sell a maximum amount of goods with minimum advertisement costs. In other words,
you want to minimize your costs and maximize your returns and by doing so, you are practicing
the principles of managerial economics.
Managers, in their day-to-day activities, are always confronted with several issues such as how
much quantity is to be supplied; at what price; should the product be made internally; or whether
,it should be bought from outside; how much quantity is to be produced to make a given amount
of profit and so on. Managerial economics provides us a basic insight into seeking solutions for
managerial problems. Economics, as the name itself implies, is an offshoot of two distinct
disciplines: Economics and Management. In other words, it is necessary to understand what
these disciplines are, at least in brief, to understand the nature and scope of managerial
economics.
INTRODUCTION TO ECONOMICS
Economics is a study of human activity both at individual and national level. The economists of
early age treated economics merely as the science of wealth. The reason for this is clear. Every
one of us in involved in efforts aimed at earning money and spending this money to satisfy our
wants such as food, Clothing, shelter, and others. Such activities of earning and spending money
are called Economic activities”. It was only during the eighteenth century that Adam Smith, the
Father of Economics, defined economics as the study of nature and uses of national wealth’.
Dr. Alfred Marshall, one of the greatest economists of the nineteenth century, writes
“Economics is a study of man’s actions in the ordinary business of life: it enquires how he gets
his income and how he uses it”. Thus, it is one side, a study of wealth; and on the other, and
more important side; it is the study of man. As Marshall observed, the chief aim of economics is
to promote ‘human welfare’, but not wealth. The definition given by
Prof. Lionel Robbins defined Economics as “the science, which studies human behaviour as a
relationship between ends and scarce means which have alternative uses”. With this, the focus of
economics shifted from ‘wealth’ to human behaviour.
CONCEPTS OF MICRO AND MACRO ECONOMICS:
‘Economics’ is defined as the study of how the humans work together to convert limited
resources into goods and services to satisfy their wants (unlimited) and how they distribute the
same among themselves. Economics has been divided into two broad parts i.e. Micro Economics
and Macro Economics. Here, in the given article we’ve broken down the concept and all the
important differences between micro economics and macro economics, in tabular form, have a
look.
MICROECONOMICS
The term ‘micro’ means small. The study of an individual consumer or a firm is called
microeconomics (also called the Theory of Firm). Micro means ‘one millionth’.
, Microeconomics deals with behavior and problems of single individual and of micro
organization. Managerial economics has its roots in microeconomics and it deals with the micro
or individual enterprises. It is concerned with the application of the concepts such as price
theory, Law of Demand and theories of market structure and so on.
MACROECONOMICS
The term ‘macro’ means large. The study of ‘aggregate or total level of economic activity in a
country is called macroeconomics. It studies the flow of economics resources or factors of
production (such as land, labour, capital, organisation and technology) from the resource owner
to the business firms and then from the business firms to the households. It deals with total
aggregates, for instance, total national income total employment, output and total investment. It
studies the interrelations among various aggregates and examines their nature and behaviour,
their determination and causes of fluctuations in the. It deals with the price level in general,
instead of studying the prices of individual commodities. It is concerned with the level of
employment in the economy. It discusses aggregate consumption, aggregate investment, price
level, and payment, theories of employment, and so on.
Though macroeconomics provides the necessary framework in term of government policies etc.,
for the firm to act upon dealing with analysis of business conditions, it has less direct relevance
in the study of theory of firm.
Micro and Macro Economics are not contradictory in nature, in fact, they are complementary. As
every coin has two aspects- micro and macroeconomics are also the two aspects of the same
coin, where one’s demerit is others merit and in this way they cover the whole economy. The
only important thing which makes them different is the area of application.
MANAGEMENT
Management is the science and art of getting things done through people in formally organized
groups. It is necessary that every organisation be well managed to enable it to achieve its desired
goals. Management includes a number of functions: Planning, organizing, staffing, directing,
and controlling. The manager while directing the efforts of his staff communicates to them the
goals, objectives, policies, and procedures; coordinates their efforts; motivates them to sustain
their enthusiasm; and leads them to achieve the corporate goals.
