managerial economics introduction - b.e,(cs final & it 3rd year) dr.k.baranidharan, sri sairam...

8/12/2019 MANAGERIAL ECONOMICS INTRODUCTION - B.E,(CS FINAL & IT 3RD YEAR) Dr.K.BARANIDHARAN, SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI

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Prepared by :

Dr. K. BARANIDHARAN

PROF.MBA

SRI SAIRAM INSTITUTE OF TECHNOLOGY

CHENNAI

ENGINEERING ECONOMICS

AND

FINANCIAL ACCOUNTING

Sri Sairam Institute of Technology 2


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EngineeringEconomics& Financial

Accountingment

Eefa

330 July 2014


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-MEANING

The study of how to direct scarce resources in the way

that most efficiently achieves a managerial

goal..

Managerial economics: Science of directing scarce

resources to manage more effectively

resources financial, human, physical

management of customers, suppliers, competitors,

internal organization

organizationsbusiness, nonprofit, household



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MANAGERIAL ECONOMICS - MEANING

Managerial economics is a means to an

end to managers in any business,

in terms of finding the most efficient way of

allocating scarce organisational resources and reaching

stated objectives.

It is based on the economic analysis foridentifying problems,organizinginformation and evaluating

alternatives Sri Sairam Institute of Technology 5


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DEFINITIONS OF M E


Managerial economics is the of

economic modes of thought to

analyse business situation

-Mc.Nair and Meriam

Managerial economics is the

integration of economic theorywith

business practice for the purpose offacilitating decision making andforward planning by the

management.


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ME applies economic theory and

methods to business and

administrative decision makingPappas and Hirschey

ME is the application of economic

principles and methodologies to the

decision making process within the

firm or organisation

Douhles


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ME : Micro as well as Macro Economics


ME is applied Microeconomics to a significant

extent: though it draws extensively fromMacroeconomic theory as well.

Example. It draws Demand analysis, Cost and

Production analysis, Pricing and output decisionfrom Microeconomics,

whereas it also derives market intelligence from

the knowledge of National Income, Inflationand stages of recession and expansion which

are subject matter of Macroeconomics


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NATURE OF M E

1. It is microeconomic in character as it

concentrate only on the study of the firmnot on the working of the economy

2. It takes help from the macroeconomics

to understand the environment inwhich the firm operates

3. It is normative rather than positive i.e., it gives

answer for the question what ought to be thanwhat is,was.

4. It is both conceptual and metrical.



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5. It focuses mainly on the theory

of the firm than ondistribution

6. Knowledge of managerial

economics helps in making wise

choices. i.e., choices among scarcityof resources.

7. It is goal oriented i.e., aims atachievement of objectives


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SIFNIFICANCE OF M E 1. It helps in decision making

2. Decisionmaking means a balance betweensimplification of analysis to be manageable andcomplication of factors in hand

3. Ithelps the manager to become an morecompetent builder

4. It helps in providing most of the concepts that are

needed for the analysis of business problems,

The concepts such as elasticity of demand ,fixed, variable

cost, SR and LR costs, opportunity costs,NPV

etc.,



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5. It helps in making decisions in the

following.

What should be the product mix?

Which is the production technique?

What is the product mix at leastcost?

What should be the level of output and

price?

How to take investment decisions?

How much should the firm advertise



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OBJECTIVES OF M E

To help in understanding themarket condition & general

economic environment with in

which the firm operate.

To provide a philosophy for

understanding & analyzingresource allocation problem



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SCOPE OF M E Objectives of a business firm

Demand analysis and forecasting Cost analysis

Production management

Supply analysis

Pricing decisions, policies and practices

Profit management

Capital budgeting and investment decisions

Decision theory under uncertainty

CompetitionSri Sairam Institute of Technology 14


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managerial economics introduction - b.e,(cs final & it 3rd year) dr.k.baranidharan, sri sairam...

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