lux segmentation

26
Welcome you on the journey of “Managerial Economics”. - Dr. Vibhor Paliwal

Upload: dhanaji-patil

Post on 21-Jan-2015

138 views

Category:

Technology


0 download

DESCRIPTION

 

TRANSCRIPT

Page 1: lux segmentation

Welcome you on the journey of “Managerial Economics”.

- Dr. Vibhor Paliwal

Page 2: lux segmentation

WHAT IS ECON0MICS ALL ABOUT“Economics is the science of scarcity”.

“It is the science that describes how individuals and society deal with the fact that wants are greater than limited resources available to satisfy those wants.”

Page 3: lux segmentation

SCARCITY HAS THREE EFFECTS - Need to make choices - Need for a rationing device - Competition

Page 4: lux segmentation

TYPES OF ECONOMIC ANALYSIS

1.Micro Economics Vs. Macro Economics

Tools of Micro economics are micro scope while the tools of macro economics are like telescope.

Macro economics stands back from the trees to observe the forest. While the micro economics gets up close and examines the tree itself

Page 5: lux segmentation

Micro Economics - is that branch of economics that deal with human behavior and choices as they relate to relatively small units- an individual , a firm, an industry , a market.

Macro Economics - is that branch of economics that deal with human behavior and choices as they relate to economy as a whole.

Page 6: lux segmentation

2.Positive vs Normative StatementsPositive statements addresses “what is” or “Verifiable things". Positive Economics deals with statements which can be verified i.e. whether true or false.

Normative statements on the other hand deals with “what ought to be”. It involves value judgment i.e. what is good and what is bad for the society.

Page 7: lux segmentation

3. Short Run and Long Run PeriodShort Run Period – It is a time period which is not enough for consumers and producers to adjust completely to any new situation.

It is a period where at least one factor of production is fixed while others are variable.

Page 8: lux segmentation

Long Run Period- It is a time period which is not enough for consumers and producers to adjust completely to any new situation.

It is a period where by all the factors can be varied. It is considered as a planning horizon

Page 9: lux segmentation

4.Partial and General EquilibriumA partial equilibrium is one when a single consumer or firm may be in equilibrium where as other consumers or other firms may not be in equilibrium.

Partial equilibrium theory considers the effects of a change on one or a few markets only.

Page 10: lux segmentation

General Equilibrium seeks to explain economic phenomenon like production ,consumption and prices in an economy as a whole.General equilibrium economics considers all markets in an economy to account for all possible effects of a change.A general equilibrium model of the economy shows the economy as an interconnected system of numerous markets, in accordance with the vision of one of the great economists, Leon Walras (1834-1910). The economy hangs together as a whole, said Walras.

Page 11: lux segmentation

KINDS OF ECONOMIC DECISIONS /CENTRAL PROBLEMS OF ECONOMY

We may enlist three major problems facing any economy. These are1. Problem of Allocation of Resources2. Problem of Utilization of Resources3. Problem of Growth of Resources

Page 12: lux segmentation

1.Problem of Allocation of Resources

a) What To Produce and in what quantity.b) How To Produce.c) For Whom goods and services are to be produced.

Page 13: lux segmentation

a) What To Produce and in what quantitySince resources in an economy are limited hence the economy has to decide about what commodities to produce and that also in what quantity. The economy has to make the decision i.e. more of consumer goods or more of capital goods.Similarly a choice has to made between wartime goods and peace time goods

Page 14: lux segmentation

b) How To Produce.How shall goods and services be produced? It is related to the method by which these are to be produced? Once the goods to be produced are decided, there is a problem of how to produce them. What tools are needed, how much land and how many workers are needed. There are many different ways of making things.

Page 15: lux segmentation

For example, clothes can be produced by employing more labor and less machines or more machines and less labor. If goods and services are produced by employing more of labor and less of capital, it is known as labor intensive method of production. If goods and services are produced by employing more of capital (machinery etc.), it is called capital intensive method of production.

Page 16: lux segmentation

c) For Whom to ProduceWho is to enjoy and get the benefit of the goods and services produced? It is not possible to satisfy everyone’s want due to scarcity, so it must be decided to whose wants are to be satisfied. Should the economy produce more of food crops or more of computers? Whose needs are to be addressed, the poorer people or the richer people? Should everybody get equal share of the total goods and services produced, even if some people may need more than others? All these decisions refer to the distribution of income and wealth in the society.

Page 17: lux segmentation

2. Problem of Utilization of ResourcesThe other central problem of an economy relates to full utilization of resources- land, labor, capital. If all the resources in the economy are fully employed, then the quantity of one commodity can be increased only by forgoing some quantity of the other. This happens when production takes place efficiently. But in reality, most of the time production does not take place efficiently. The factors are not fully employed.

Page 18: lux segmentation

and the production is below the optimum capacity of economy. You must have seen some of our family members or friends who are unemployed despite being educated.

Similarly in our agricultural land we still grow only one crop in a year. This is not a good sign, as the resources are already scarce. If these scarce resources are also not utilized fully, it is wastage of resources.

Page 19: lux segmentation

3. Problem of Growth of ResourcesResources like labor, capital and technology grow over a period of time, the problem of scarcity can be addressed. Thus, for the growth of any economy, the resources available to the economy should grow. It is only through the effective growth of resources that a society can enjoy a higher standard of living. This is how the countries have developed. If the resources have failed to grow, the countries continue to be underdeveloped. Thus, the economies should make efforts so that their resources grow gradually to meet the growing needs.

Page 20: lux segmentation

Production Possibility Curve-

A curve that shows maximum combination of two outputs an economy can produce in a given period of time with its available resources and technology.

A PPC operates with following assumptions-

a) Fixed Resourcesb) Fully Employed Resourcesc) Technology remains unchanged

Page 21: lux segmentation

Production Possibility Schedule

Guns Butter0 100

1 90

2 70

3 40

4 0

Page 22: lux segmentation
Page 23: lux segmentation
Page 24: lux segmentation
Page 25: lux segmentation
Page 26: lux segmentation