Managerial Economics: Meaning, Scope, and Fundamental Concepts, Study Guides, Projects, Research of Financial Management

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PAPER – IV MANAGERIAL

ECONOMICS

Objectives : To impart knowledge and understanding to students on managerial economics and their applications to business decision making.

UNIT – I Meaning and Scope of Managerial Economics – Role and Responsibility of a managerial economics – Fundamentals – Concepts – Demand & Supply: Law of Demand – Types of Demand – Elasticity of demand – Demand forecasting, Law of supply, Elasticity of Supply.

UNIT – II Macro economic variables

• national income, investment, savings, employment, inflation, balance of payment, exchange rate

REFERENCES

1. Geetika, Ghosh, Choudhury, Managerial Economics, Tata McGrawHill 2009
2. Gupta, G.S.Macroeconomics, Theory and Applications, Tata McGTaw-Hill
3. Hirschey, Managerial Economics

• An integrative Approach, Gengage,

4. Mankar, Business Economics Macmillan India Ltd 2009.

PAPER – IV MANAGERIAL ECONOMICS

UNIT NO. TITLE OF LESSON

1. MeaningEconomics^ And^ Scope^ Of^ Managerial
2. Macro Economic Variables
3. Determination Of National Income
4. AnalysisUnemployment^ Of^ Inflation^ And
5. International Trade

1.5 Let Us Sum Up 1.6 Unit End Exercises 1.7 Points for Discussion 1.8 Answers to Check Your Progress 1.9 Suggested Readings

1.11.1 INTRODUCTIONINTRODUCTION

Managerial decisions play a critical role in an organisation. The success or failure of a business rests upon the decisions taken by managers. Businesses today are increasingly complex and are interlinked with other areas of the economy. Decisions related to production and marketing of goods are formed

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1.21.2 OBJECTIVESOBJECTIVES

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A managerial economist is expected to answer these questions:

Is competition likely to increase or decrease? What is the population shift and its impact on purchasing power? Will the price of raw materials remain constant or will it change?

A managerial economist has some key functions within an organization. These include:

Sales forecasting Market research

Production scheduling Economic analysis of competing industry Investment appraisal Security management analysis Advise on foreign exchange management Advice on trade Environmental forecasting Agricultural sales forecasting

In an organization, a managerial economist has the following responsibilities:

To play an active role in helping the company earn profits To make accurate forecasts

can purchase with a given amount of money. In addition, the person should be willing to spend that money to buy the commodity.

The term ‘demand’has no meaning unless it is related to price. For example, if we say, ‘the monthly demand for rice in state A is 20, kilograms’ it has no meaning unless we specify the price at which this quantity is demanded.

It is also important to specify the time period for which the commodity is demanded. Therefore, in order to be accurate we must say: The monthly demand for rice in state A at Rs.10 per kilogram is 20,

kilograms'. It is necessary to specify the period and the price because demand for a commodity will be different at different prices of that commodity and for different periods of time. Demand can be defined as: The demand for a commodity at a given price is the amount of it which will be bought per unit of time at that price.

1.4.11.4.1 LAW OF DEMANDLAW OF DEMAND

Law of demand shows the relation between price and quantity demanded of a commodity in the market. In the words of Samuelson, “Law of Demand states that people

Income level should remain constant: The law of demand operates only when the income level of the buyer remains constant.

Tastes of the buyer should not change: If the tastes of the buyer change, the demand will automatically change even if the price remains unchanged.

Prices of other goods should remain constant: Changes in the prices of other goods may impact the demand for a particular commodity.

No speculation: If the buyers of a commodity expect that its price will rise in future they buy more

of it at the current price. This behaviour of buyers violates the law of demand. The concept of law of demand can be illustrated with the help of a demand schedule.

A demand schedule is a series of quantities, which buyers would like to buy per unit of time at different prices. An imaginary demand schedule is given in the table below.

Price of Sugar (Rs.) Quantity Demanded 10 1 8 2 6 3 4 4 2 5