Importance of managerial economics ppt. 5 Chief Characteristics of Managerial Economics 2019-02-19

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Scope of Managerial Economics

importance of managerial economics ppt

If the expected demand for products is higher, then the organization may plan to expand further. Traditional economic theory assumes a risk-free world of certainty; but the real world business is full of all sorts of risk and uncertainty. The problems of scarcity and optimal or ideal allocation of resources are the central problem in micro-economics. Types of Goods: Affect the demand forecasting process to a larger extent. It helps in determining relative prices of different goods.

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Managerial Economics Overview

importance of managerial economics ppt

The large aggregates are total saving, total consumption, total income, total employment, general price level, wage level, cost structure, etc. Opportunity cost is just a notional idea which does not appear in the books of account of the company. The role of the managerial economist is not to take decisions but to analyse, conclude and recommend. If order adds only Rs. From consumers point of view, short-run refers to a period in which they respond to the changes in price, given the taste and preferences of the consumers, while long-run is a time period in which the consumers have enough time to respond to price changes by varying their tastes and preferences. The order can be accepted on the basis of incremental reasoning. A demand forecast can be carried at three levels, namely, macro level, industry level, and firm level.

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Simplynotes

importance of managerial economics ppt

Robbins regards economics as a pure science of what is, which is not concerned with moral or ethical questions. A manager has to take numerous decisions in the management of business which may be minor or major, simple or complex. In this way, demand forecasting enables organizations to prepare their budget. The theory of competitive equilibrium is entirely based on axiomatic method. All the economic theories, tools, and concepts are covered under the scope of managerial economics to analyze the business environment.

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What Is the Nature and Scope of Managerial Economics?

importance of managerial economics ppt

The size of the plant should conform to the sales requirement of the organization. The primary function of a manager in business organisation is decision making and forward planning under uncertain business conditions. Managerial econom­ics is a fundamental academic subject which seeks to understand and to analyse the problems of busi­ness decision making. A high degree of importance is attached to them. Mathematically it is written as 3 Meaning and concept of elasticity cont Ed Percentage Change in Quantity Demand Percentage Change in Price Or? Computer is not only used for scientific or mathematical applications, it may also be used for some business applications, docu­ment generations and graphical solutions. If there is a rapid change in technology, the existing technology or products may become obsolete.

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What Is the Nature and Scope of Managerial Economics?

importance of managerial economics ppt

Importance of Demand Forecasting Why demand forecasting is needed in a business? It concentrates on the decision process, decision model and decision variables at the firm level. The managerial economist should make use of his experience and facts in deciding the nature of action. Everyone knows that a rupee today is worth more than a rupee will be two years from now. Factors Influencing Demand Forecasting: Demand forecasting is a proactive process that helps in determining what products are needed where, when, and in what quantities. They strive to attain a multiplicity of objec­tives.

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Introduction to Managerial Economics

importance of managerial economics ppt

Instead of explaining what a firm is doing, we explain what it should do to make its decision effective. This, in turn helps the firm in manipulating the demand for its output. In everyday life, we apply the notion of opportunity cost even if we are unable to articulate its significance. As a business manager has to function in an environment of uncertainty, it is imperative to anticipate the future working environment in terms of the said quantities. These factors are associated with business operation, knowledge of these factors aids the management in making sound business decisions. An organization needs to clearly state the purpose of demand forecasting before initiating it.

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Importance of Management Principles

importance of managerial economics ppt

It concentrates on controlled experi­ments and investigates the behaviour of preconceived elements in a highly simplified environment. Slide 20: This is Analyze Results slide. He should be ready to undertake special assignments with full seriousness. It is employed when the objective func­tion is to maximise profit, output or efficiency. They need to forecast demand, supply, price, profit, costs and returns from investments. A forecast can be specific or general. These decisions aim at achieving the best interests of the organisation.

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Introduction to managerial economics

importance of managerial economics ppt

Economic theory has the characteristics of both micro and macro economics. In appraising a company, we must first understand how profit arises. The contribution of economics to managerial economics lies in certain principles which are basic to managerial economics. Entry and exit of seller firms can take place easily. The concept of profit maximisation is very useful in selecting the alternatives in making a decision at the firm level. Much of the development of techniques and concepts such as Linear Programming, Dynamic Programming, Input-output Analysis, Inventory Theory, Information Theory, Probability Theory, Queueing Theory, Game Theory, Decision Theory and Symbolic Logic.

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