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    1.introduction To Managerial Economics

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    Diksha Pahuja
    The equi-marginal principle states that a consumer will allocate his limited income in such a way that the marginal utility per rupee spent is equal across all goods. In other words, the last rupee spent on each good yields equal marginal utility. This ensures the consumer achieves maximum satisfaction within his budget constraint.

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    1.introduction To Managerial Economics

    Uploaded by

    Diksha Pahuja
    4K views21 pages
    The equi-marginal principle states that a consumer will allocate his limited income in such a way that the marginal utility per rupee spent is equal across all goods. In other words, the last rupee spent on each good yields equal marginal utility. This ensures the consumer achieves maximum satisfaction within his budget constraint.

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    The equi-marginal principle states that a consumer will allocate his limited income in such a way that the marginal utility per rupee spent is equal across all goods. In other words, the last rupee spent on each good yields equal marginal utility. This ensures the consumer achieves maximum satisfaction within his budget constraint.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    4K views21 pages

    1.introduction To Managerial Economics

    Uploaded by

    Diksha Pahuja
    The equi-marginal principle states that a consumer will allocate his limited income in such a way that the marginal utility per rupee spent is equal across all goods. In other words, the last rupee spent on each good yields equal marginal utility. This ensures the consumer achieves maximum satisfaction within his budget constraint.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 21

    Introduction to Managerial

    Economics
    Lecture - 1
    Economics
    • The term economics comes from the Ancient
    Greek word oikonomia which means "management
    of a household”.
    • Oikos means house + nomo means custom or rules,
    hence rules of the house.
    • Economics is the social science that analyzes
    the production, distribution, and consumption of
    goods and services.
    Different Views on Economics
    • According to Adam Smith :- Economics
    is an inquiry into the nature and causes of
    the wealth of nations

    • According to Alfred Marshall :-


    Economics is a study of man in the
    ordinary business of life. It enquires how
    he gets his income and how he uses it.
    What is Managerial Economics?

    Managerial economics is the study of economic


    theories, logic and tools of economic analysis
    that are used in the process of business decision
    making.

    Economic theories and techniques of economic


    analysis are applied to analyze business
    problems, evaluate business options and
    opportunities with a view to arriving at an
    appropriate business decision.
    DIFFERENT SCHOLAR VIEWS

    • According to Mc Nadir & Medium- Managerial


    Economics is the use of economic models of thought
    to analyse business situation.

    • Spencer & Siegal Man-Managerial Economics is


    integration of economic theory & business practices
    for facilitating decision-making & forward planning by
    management.

    • Brigham & Pappas- Managerial Economics is the


    application of economic theory & methodology to
    business administration practices.
    FEATURES OF MANAGERIAL
    ECONOMICS
    • Concerned with decision making of economic nature.

    • Deals with how decision should be made by the managers to


    achieve the organization goals.

    • Managerial Economics is pragmatic (dealing with things sensibly and


    realistically in a way that is based on practical rather than theoretical considerations).

    • It is concerned with those analytical tools, which are useful in


    improving decision-making.

    • Managerial Economics is both conceptual. (based on mental concepts)


    FEATURES OF MANAGERIAL
    ECONOMICS CONT…
    • Microeconomic in nature

    • Belongs to normative Economics


    (Normative economics is a part of economics that expresses value or normative
     judgments about economic fairness. For Eg. price of milk should be Rs. 40 per litre
    to give dairy farmers a higher living standard and to save the family farm.)

    • Utilizes some theories of Macroeconomics

    • Provides a link between traditional economic &


    decision-making Sciences.
    SCOPE OF MANAGERIAL ECONOMICS
    • Demand Analysis & Forecasting
    • Pricing Decision & Policies
    • Capital Management
    • Cost & Production Decision
    • Analysis of Business Environment
    • Profit Management
    • Other Disciplines
    Difference Between Managerial
    Economics & Economics
    • Managerial Economics is micro • Economics is both micro and
    in character. macro in character.
    • Managerial Economics study • Economics deals with the
    only practical application of the study of principles itself.
    Economic principle to the
    problem of firm.
    • Managerial Economics deals • Economics deals with
    with the Economic problems of
    Economic problems of both
    the firm
    firm and individuals
    • It is normative in nature
    • Its is positive & normative in
    nature
    • No assumption because of
    practicality. • It is based on assumption.
    Managerial Economics & Other
    Disciplines
    • Managerial Economics & Mathematics
    • Managerial Economics & Operations Research
    • Managerial Economics & Statistics
    • Managerial Economics & Economics
    • Managerial Economics & Psychology
    • Managerial Economics & Sociology
    Managerial Economics & Other
    Disciplines Cont..
    • Managerial Economics & Politics
    • Managerial Economics & jurisprudence
    • Managerial Economics & Theory of Decision
    Making
    • Managerial Economics & History
    Significance of Managerial
    Economics
    • Incorporate useful ideas from other Disciplines
    • Build competent Managers
    • Help in achieving social & Economic Welfare
    • Help in reaching a decision in complicated
    Environment
    • Converting traditional theoretical concept to the
    actual business practices
    • Coordinate with different department
    Managerial Economics & Decision
    Making
    • A decision is simply a selection from two or more
    course of action.

    • When two or more course of actions are available,


    there is the problem of choice-the economic
    problem.

    • Once one course of action is chosen the economic


    problem is solved.
    Decision Making Process
    • Establish Objectives
    • Define the problem
    • Identify causal factor
    • Finding alternative solutions
    • Gathering information
    • Evaluate & Screen Alternatives
    • Implement best alternative & Monitor Results
    Basic Economic Concepts In
    Decision Making
    • Opportunity Cost Principle
    • Production Possibility Frontier
    • Principle of marginalism
    • Diminishing Marginal Utility
    • The equi marginal Principle
    • Scarcity Principle
    • Discounting Principle
    • Principle of time perspective
    Opportunity Cost Principle
    • The cost of an alternative that must be
    forgone in order to pursue a certain action.

    • Example:- If a gardener decides to grow


    carrots, his or her opportunity cost is the
    alternative crop that might have been grown
    instead (potatoes, tomatoes, pumpkins, etc.)
    Production Possibility Frontier
    • A graphical representation of the
    alternative combinations of the amounts of
    two goods or services that an economy can produce
    by transferring resources from one good or service to
    the other.
    Principle of Marginalism
    • Marginalism seeks to find the difference between
    the benefits and the costs of an activity. It is a
    key concept that if properly applied, can help a
    business determine the overall benefit of a
    venture it wants to undertake.

    • Marginalism seeks to measure the overall benefit


    of an activity as against the cost of that activity.
    Diminishing Marginal Utility
    •  DMU law of economics stating that as a person
    increases consumption of a product - while
    keeping consumption of other products constant -
    there is a decline in the marginal utility that
    person derives from consuming each additional
    unit of that product.
    The Equi-Marginal Principle
    •  The principle of equi-marginal utility explains
    the behavior of a consumer in distributing his
    limited income among various goods and
    services
    • This law states that how a consumer allocates
    his money income between various goods so
    as to obtain maximum satisfaction.
    The Equi-Marginal Principle

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