BRIEF OUTLINE OF THE MODEL ANSWER TO NATURE,SCOPE AND SIGNIFICANCE OF MANAGERIAL ECONOMICS

  NATURE AND SCOPE OF MANAGERIAL ECONOMICS

  MANAGERIAL ECONOMICS

  INTRODUCTION

q REFERS TO THE INTEGRATION OF ECONOMIC THEORY WITH BUSINESS PRACTICES. THAT BRANCH OF ECONOMICS WHICH SERVE AS LINK BETWEEN ABSTRACT THEORY AND MANAGERIAL PRACTICES.

q ECONOMICS AS A SCIENCE IS CONCERNED WITH THE PROBLEM OF ALLOCATING RESOURCES AMONG COMPETING ENDS. ECONOMICS PROVIDE THE TOOLS AND CONCEPTS WHICH EXPLAIN THE BEHAVIOR PATTERN OF ECONMIC VARIABLES SUCH AS DEMAND,SUPPLY,PRICE AND COMPETITION.

q MEANING OF MANAGERIAL: THE TERM MGMT REFERS TO THE FUNCTIONS OF PLANNING. MAIN FUNCTION OF MGMT ARE DECISION MAKING AND FORWARD PLANNING

qMANAGERIAL ECONOMICS IS THE APPLICATION OF ECONOMIC THEORY AND QUANTITATIVE METHODS TO MANAGERIAL MGMT DECISION MAKING

  MEANING OF MANAGERIAL ECONOMICS

vMANAGERIAL ECONOMICS IS THAT PART OF ECONMIC THEORY WHICH DEALS WITH THE APPLICATION OF ECONOMIC TOOLS AND CONCEPTS TO THE SOLUTION OF BUSINESS PROBLEMS OR THE PROBLEMS OF RESOURCE ALLOCATION AMONG THE COMPETING ENDS.

vEDWIN MANSFIELD,” MANAGERIAL ECONOMICS IS CONCERNED WITH THE WAYS IN WHICH MANAGER SHOULD MAKE DECISIONS IN ORDER TO MAXIMIZE THE EFFECTIVENESS OR PERFORMANCE OF THE ORGANISATIONS THEY MANAGE.

vJOEL DEAN,” THE PURPOSE OF MANAGERIAL ECONOMICS IS TO SHOW HOW ECONMIC ANALYSIS CAN BE USED IN FORMULATING MANAGERIAL POICIES.

  NATURE OF MANAGERIAL ECONOMICS

   

1. MANAGERIAL ECONOMICS
2. CONCERNED WITH DECISION MAKING OF ECONOMIC NATURE
3. GOAL ORIENTED AND PERSPECTIVE
4. PRAGMATIC:CONCERNED WITH APPLICATION
5. BOTH CONCEPTUAL AND METRICAL
6. FUNDAMENTAL NATURE OF MANAGERIAL ECONOMICS
7. ECONOMIC THEORY
8. MACRO ECONOMICS : DEALS WITH AGGREGATE ECONOMIC CONCEPTS RELATING TO THE ENTIRE ECONOMY. PROVIDE THE FRAMEWORK IN WHICH THE FIRM OPERATES.
9. FREE ENTERPRISE ECONOMY
10. A RAPID TECHNOLOGICAL AND ECONOMIC CHANGES
11. CYCLICAL FLUCTUATIONS
12. MONETARY AND FISCAL POLICY

  FUNDAMENTAL NATURE OF MANAGERIAL ECONOMICS

ØMICRO ECONOMICS:-

I.            DEALS WITH THE PROBLEMS OF INDIVIDUAL,FIRMS

II.            HELPS IN STUDYING WHAT IS GOING ON WITH IN THE FIRM

III.            HOW BEST TO USE THE LIMITED RESOURCES

ØPOSITIVE VS NORMATIVE APPROACH

a.        POSITIVE APPROACH:-WHAT IS,WAS WILL BE

b.        NORMATIVE APPROACH WHAT OUGHT TO BE

ØINTEGRATION OF ECONMIC THEORY AND BUSINESS PRACTICE

a.       UNDERSTAND THE ACTUAL BEHAVIOR OF THE BUSINESS

b.       ESTIMATE AND PREDICT THE ECONOMIC QUANTITIES AND RELATIONSHIP

c.        DECISION MAKING AND FORWARD PLANNING

d.       SIGNIFICANCE OF THE ENVIRONMENT

ØFEATURES OF MANAGERIAL ECONOMICS

1. MANAGERIAL ECONOMICS IS MICRO ECONOMICS IN CHARACTER
2. HELP OF MACRO ECONOMICS
3. PRAGMATIC
4. NORMATIVE
5. CONCEPTUAL AND METRICAL
6. THEORY OF FIRM
7. WISE CHOICES
8. MULTIDISCIPLINARY

• SCOPE OF MANAGERIAL ECONOMICS

 SCOPE IS VERY WIDE AS IT INVOLVES APPLICATION OF ECONOMIC CONCEPTS TO PROBLEMS WE FACE IN REALITY IN BUSINESS.

q DEALS WITH FOUR PROBLEMS IN BOTH DECISION MAKING AND FORWARD PLANNING:

1. RESOURCE ALLOCATION FOR OPTIMAL RESULTS
2. INVENTORY QUEUING PROBLEM
3. PRICING PROBLEMS
4. INVESTMENT PROBLEMS

ØSCOPE OF MANAGERIAL ECONOMICS

ØTHEORY OF DEMAND ANALYSIS AND FORECASTING

1. DEMAND DETERMINANTS
2. DEMAND FORECASTING
3. DEMAND THEORY EXPLAINS THE CONSUMER BEHAVIOR
4. HOW DO THE CONSUMER DECIDE TO BUY OR NOT
5. QUANTITY
6. BEHAVIOR OF CONSUMER WHEN THERE IS CHANGE IN THE PRICE,TASTES ETC
7. DEMAND FORECASTING IS ESSENTIAL FOR MANAGERIAL PLANNING

ØTHEORY OF PRODUCTIONS AND PRODUCTION DECISIONS

1. ALSO KNOWN AS THEORY OF FIRMS
2. RELATIONSHIP BETWEEN INPUTS AND OUTPUTS
3. RETURNS TO FACTOR IN SHORT PERIOD
4. OPTIMUM SIZE OF THE PLANT,SIZE OF THE TOTAL OUTPUT AMOUNT OF CAPITAL AND LABOUR

ØANALYSIS OF MARKET STRUCTURE AND PRICING THEORY

a.       PRICES ARE DETERMINED UNDER DIFFERENT MARKET CONDITIONS

b.       ROLE OF ADVERTISING

c.        HELPFUL IN DETERMINING THE PRICE POLICY OF THE FIRM AND PRICE THEORY AND PRODUCTION THEORY OPTIMUM SIZE OF THE FIRM

ØCOST ANALYSIS

a.       DETERMINATION OF COST,METHODS OF ESTIMATING THE COST

b.       COST VOLUME PROFIT ANALYSIS

c.        COVERS COST CONCEPTS,CLASSIFICATION,COST OUTPUT RELATIONSHIPS,ECONOMIES AND DISECONMIES

ØPROFIT ANALYSIS AND PROFIT MGMT

a.       CONDITIONS OF UNCERTAINTY

b.       DEMAND FOR THE PRODUCT AND INPUT PRICES ETC

c.      GUIDES THE MEASUREMENT AND MGMT OF PROFITS AND MAKING ALLOWANCES FOR THE RISK AND CALCULATING RETURN ON CAPITAL EMPLOYED

ØTHEORY OF CAPITAL AND INVESTMENT DECISIONS

a.       CAPITAL IS THE FOUNDATION OF THE BUSINESS

b.       CHOICE OF INVESTMENT PROJECTS

c.        ASSESSING THE EFFICIENCY OF CAPITAL

d.       ALLOCATION OF CAPITAL

e.        CAPITAL BUDGETING ETC

ØINVENTORY MGMT

a.       MGMT OF INVENTORY

b.       OPTIMUM INVESTMENT IN INVENTORY

c.        BUSINESS CYCLES

ØIMPORTANCE OF ME IN DECISION MAKING

ØFINANCIAL DECISION:-

a.       COSTING

b.       BUDGETING

c.        ACCOUNTING

d.       AUDITING

e.        TAX PLANNING

f.         PORTFOLIO COMPOSITION

g.       CAPITAL STRUCTURE

h.       DIVIDEND DISTRIBUTION

Ø PRODUCTION DECISIONS:-PRODUCT,INVENTORY CONTROL,CHOICE OF TECHNOLOGY,PLANT LOCATION,PLANT LAYOUT AND PRODUCTION PLANNING,SCHEDULING AND MAINTENANCE MGMT

Ø PERSONNEL DECISION:-

a.       RECRUITMENT

b.       SELECTION

c.        TRAINING

d.       TRANSFER,RETIREMENT ETC

ØMARKETING DECISIONS:-

a.       TARGET TERRITORY

b.       SALES VOLUME,SALES FORCE SALES PROMOTIONS,ADVERTISING,PACKAGING ETC

c.        MISCELLANEOUS DECISIONS:-INFORMATION SYSTEM

d.       PUBLIC RELATIONS ETC

•               TOOLS AND TECHNIQUES

a.       KNOWLEDGE OF THE CONCEPTS

b.       IDEAS FROM OTHER SUBJECTS

c.        REVENUE TO THE GOVT

d.       SOCIAL BENEFITS

e.        DECISION MAKING IN COMPLEX ENVIRONMENT

f.         HELPFUL TO NEW AGE MANAGERS