Transcript
Managerial Economics
By Rajesh Singh
Meaning of Managerial Economics
According to Mc Gutgan and Moyer “Managerial economics is the application of economic theory and methodology to decision-making problems faced by both public and private institutions”.
Scope of Managerial Economics
Micro Economics Macro Economics Statistics Math's
Micro Economics
Microeconomics seeks to understand how individuals and companies make decisions about how to allocate scarce resources
For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry.
Nature of Micro Economics
Micro AnalysisIndividual StudyAllocation of
Resoures
Scope of Micro Economics
Theory of demand and supply Theory of utility Theory of production & cost Theory of factor pricing
Macro Economics
Macroeconomics is used at the national level to understand a country’s growth, inflation and unemployment rates.
For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.
Nature of Macro Economics
Macro Analysis Overall study of Economics System
Scope of Macro Economics
National Income
Employment
inflation
Business Cycle
Money
Demand
Demand means that almost any kind of wish or desire or need. But to an economist , demand refers to both willingness and ability to pay.
Factors Influence Demand
Micro Factors Macro Factors
Micro Factors
Prices of goods
Prices of related goods
Income
Taste
Macro factors
Elasticity of Demand
The degree to which demand for a good or service varies with its price. Normally, sales increase with drop in prices and decrease with rise in prices.
Types of Elasticity of Demand
Price Elasticity of Demand
Cross Elasticity of Demand
Income Elasticity of Demand
Price Elasticity of Demand
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price, with all other factors held constant.
Degree of Price Elasticity of Demand
Perfectly Elasticity Demand
Perfectly Inelasticity Demand
Unitary Elasticity Demand
More than Unitary Elasticity Demand
Less than Unitary Elasticity Demand
Perfectly Inelasticity of Demand
XQO
P2
P
P1
Quantity
Price
Y
Unitary elasticity Demand
X
P
P1
O Q Q1
Y
Price
Quantity
More than Unitary Elasticity Demand
P
P1
Y
XQ1Q
Price
Quantity
Less than Unitary Elasticity Demand
XQ1QO
P
P1
Y
Price
Quantity
Cross Elasticity of Demand
Cross elasticity of demand measures the degree of responsiveness of the quantity demanded of one good (Good A) to change in the price of another good (Good B).
Negative Complementary goods Positive Substitute goods
Degrees of Cross Elasticity of Demand
Positive Cross Elasticity of
Demand
Negative Cross Elasticity of
Demand
Zero Cross Elasticity of
Demand
Positive Cross Elasticity of Demand
P
P1
D D1 XO
Y
Price of Goods Y
Demand of Goods X
Negative Cross Elasticity of Demand
XDD1
O
P
P1Price of Goods Y
Y
Demand of Goods X
Zero Cross Elasticity of Demand
XO D
Y
P1
P
P2
Price of Goods Y
Demand of Goods X
Degrees of Income Elasticity of Demand
Positive Income Elasticity of
Demand
Negative Income Elasticity of
Demand
Zero Elasticity of Demand
Positive Income Elasticity of Demand
X
Y
I1
I
D D1
O
Negative Income Elasticity of Demand
X
Y
O D1 D
I1
IPrice
Demand
Zero Income Elasticity of Demand
XDO
I
I1
I2
Y
Demand Forecasting
Forecasting is a tool used for predicting future demand based on past demand
information.
Factors Determining of Demand Forecasting
Period cover under
forecasting
Level of forecasting
Purpose of Forecasting
Nature of products
Others factors
Period cover under Forecasting
Medium term
Forecasting
Long term Forecasting
Short term Forecastin
g
Level of Forecasting
•Macro level•Individual level
•Firm level
Method of Demand Forecasting
Opinion Poll Metho
d
Statistical
Methods
Opinion Poll Method
Consumer Survey Method
Collection Opinion Method
Experts Opinion Method
Consumer Survey Method
Complete Enumeration Method
Sample Survey Method
End Use Survey
Statistical Method
Trend Projection Method
Regression Method
Simultaneous Equations Method
Trend Projection Method
Time Series Analysis
Moving Average Graphic Method Arima Method
Process of Forecasting
Setting the Objective
Selection of Goods
Selection of Method Interpreting the
Results
THANK YOU
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