AREA OF MANAGERIAL ECONOMICS - ENGINEERING ECONOMICS & FINANCIAL ACCOUNTING - DR.K.BARANIDHARAN, SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI

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Prepared by :Dr. K. BARANIDHARAN

PROF.MBASRI SAIRAM INSTITUTE OF TECHNOLOGY

CHENNAI

ENGINEERING ECONOMICS

AND FINANCIAL

ACCOUNTING

Engineering Economics&

Financial Accountingment

Ee&fa3April 10, 2023

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MAIN AREA OF M E, 1.DEMAND DECISION

• THe Forecasting Of Demand For A Given Product And Service Is The First Task Of The ME.

• The behavioral implication such as the customer response to given changes of price and supply.

• The changes of income levels of customer

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2.INPUT-OUTPUT DECISION

• The cost of inputs in relation to output are studied to optimise profits.

• Production and cost function are estimated to certain parameters,

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3.PRICE-OUTPUT DECISION

• The Production Is Ready And The Task Is Determine The Price In Different Market Situation Such As Perfect And Imperfect Markets Ranging From Monopoly.

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4.PROFIT - RELATED DECISION• The technique such as

Break Even Analysis, cost reduction and control and ratio analysis to ascertain the level of profit.

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5.INVESTMENT DECISION

• Investment decision are also called capital budgeting decisions.

• Involve the large fund commitment, which determine the fate of the firm.

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6.ECONOMIC FORECASTING AND FORWARD PLANNING

• The economic forecasting leads to the forward planning.

• The firm operate environment which is dominated by the INTERNAL AND EXTERNAL factors.

• EXTERNAL: govt policy, competitation, employment, labour, human resources, finance, marketing..

• INTERNAL: policies, procedures relating to the finance, people, market and products….

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M E related with OTHER DISCIPLINES

• Managerial Economics and Traditional Economics:

• Economics and Managerial economics both are facing identical problems,i.e., problem of scarcity and resource allocation.

• Since labour and capital are always limited it must find way for effective utilizing of these resources.

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ITS MAIN CONTRIBUTION TO ME

• HELP IN UNDERSTANDING THE MARKET CONDITIONS AND THE GENERAL ECONOMIC ENVIRONMENTWITHIN WHICH THE FIRM OPERATES.

• TO PROVIDE THE PHILOSOPHY FOR UNDERSTANDING AND ANALYSING THE RESOURCE ALLOCATION PROBLEMS

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1. M E OPERATIONS RESEARCH• Both operations research and managerial economics

are concerned with taking effective decisions, • Decision making is the main focus in OR and ME.• To understand and to analyse the problems of

business decision making while OR is an activity carried out by functional specialist within the firm to help the manager to do his job of solving decision problems.

• It refers to both minimisation of costs and maximisation of revenue

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• ITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

• OR models like queuing, linear programming etc.., are widely used in managerial economics

• Model building, economic models are more general and confined to broad economic decision making

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2.M ECONOMICS AND MATHEMATICS

• Mathematics is closely related to managerial because managerial economics ,being conceptual but also metrical.

• Its metrical property is used to estimate and predict the relevant economic factors for decision making and forward planning

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• ITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

• Geometry, algebra and calculus• Logarithms and exponential, vectors

and determinants, input-output tables etc.,

• Even OR can be included as a part of mathematical exercise

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3. ME AND STATISTICS

• Statistics is widely used in managerial economics. It is mainly needed for a correct judgement

• and decision making• ITS MAIN CONTRIBUTION TO

MANAGERIAL ECONOMICS• To handle the unforeseen circumstances

the theory probability is mainly used.

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4.ME AND THE THEORY OF DECISION

• The theory of decision making is relatively a new subject that has significance for managerial economics.

• Much of economic theory is based on the single goal MAXIMISATION OF PROFIT, but theory of decision making recognizes the multiplicity of goals and the pervasiveness of uncertainty

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5.ROLE OF ME IN BUSINESS

• The task of organizing and processing information and then making an intelligent decision based upon two general forms

• Task of making Specific decisions• Task of making General decisions

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Task of making Specific decisions

• Production scheduling• Demand forecasting• Market research• Economic analysis of the industry• Investment appraisal• Security management appraisal• Advice on trade• Advice on foreign exchange management• Pricing and related decisions

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Task of making General decisions

• Analysing the general economic condition of the economy

• Analyzing the demand for the product

• Analysing the general market condition of the economy

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6.ACCOUNTANCY

• Accountant provides accounting information relating to Cost, Revenues, Receivables, Payables, Profit/Losses. In the data performance of the firm result.

• Decision making and forward planning.

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7.PSYCHOLOGY

• CONSUMER PSYCHOLOGY is the basis on which a ME acts.

• The customer react the change the price or supply and it is effect of demand/profits is the main focus study of ME.

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8.ORGANISATIONAL BEHAVIOUR

• The study develop behavioural model of firm integrating the manager’s behaviour with that of the owner.