Managerial Economics -by Dr. Shradha Malhotra Banga Web blog: drshradhabanga.jimdo.com Mail id:

About the Instructor Shradha M Banga Academic Qualification Ph.D.: Rajasthan University, Jaipur M.B.A. (Investments) : ICFAI University M.A. Economics: Rani Durgawati University, Jabalpur Mastery in : Innovation and Commercialization, Entrepreneurship: Massachusetts Institute of Technology, Cambridge, U.S. Globalization: University of Georgetown, U.S. Statistics Inference: University of California, Berkeley, U.S.

About the Course 6 units covering: Nature, Scope and Methods of Managerial Economics (Chapter 1) theories, Theory of the Firm (Chapter 2) Demand Theory (Chapter 3) Production and Cost Theory (Chapters 5 & 6) Market Structure and Pricing (Chapter 8) Pricing Strategy (Chapter 10)

Book Nick Wilkinson: Managerial Economics: A Problem Solving Approach: Cambridge University Press: 2005 (available for free download at s/Managerial%20Economics- %20A%20Problem%20Solving%20Approach.pdf ) s/Managerial%20Economics- %20A%20Problem%20Solving%20Approach.pdf

A few brain activators.. Why is there discount after every season.. Can u apply some economic theory here… Are a refrigerator seller what will u do in september increase or decrease the price???? How much would be the increase or decrease???

The decisions to be made by managers.. What to produce How to produce and For whom to produce.. Activity: In Greater NOIDA you want to construct Water Park.. How would you make the strategy..

Managerial Economics A means to an end by managers, in terms of finding the most efficient way of allocating their scarce resources and reaching their objectives

Managerial Economics is related to: Economic theory Decision Sciences Business Functions

Economic theory The main branch of economic theory with which managerial economics is related is microeconomics, which deals essentially with how markets work and interactions between the various components of the economy

Micro Economics and Managerial Economics There is one main difference between the emphasis of microeconomics and that of managerial economics the former tends to be descriptive, explaining how markets work and what firms do in practice, while the latter is often prescriptive, stating what firms should do, in order to reach certain objectives. At this point it is necessary to make another very important distinction: that between positive and normative economics

Decision Sciences The decision sciences provide the tools and techniques of analysis used in managerial economics. The most important aspects are as follows: * numerical and algebraic analysis * optimization * statistical estimation and forecasting * analysis of risk and uncertainty * discounting and time-value-of-money techniques

Business Functions Relationship with business functions..All firms consist of organizations that are divided structurally into different departments or units, even if this is not necessarily performed on a formal basis. Typically the units involved are: 1 production and operations 2 marketing 3 finance and accounting 4 human resources

Global Warming: A Problem Can Managerial Economics Solve this issue Solution: Kyoto Protocol

Elements/Areas of Managerial Economics Starting point Obj of Business Pricing: Demand and Cost theory Consumer theory and Production theory Theory of firm & Competition theory Government policy for above

Methods to make Decisions Make objective Study theories: scientific theories are positive and normative Empirical observation: real world observation Empirical study can be Experimental/controllable or Observational Example : Lab experiment and market experiment Econometrics

Managerial Economics Thus as a manager the main task is to firstly understand the objective clearly, Then to make a study of prevalent theories: their features and relationships with own conditions. These primary steps enables a manager to assume a particular result (hypothesis) and then to create a model for action.

Research Study through Model The model clarifies the expected relationship between variables under a respective study. The foolproof analysis of data based on strong assumptions gives way to acceptance or rejection of theory for solving management problem. This complete process of testing economic theory is referred to as Econometrics by Economists. A manager undertakes this process in each and every decision of his professional life.

The take aways Economic theory: describes the relationship betweens between phenomenon that we observe Good Theory makes testable predictions Positive and Normative Study Empirical Study Experimental Study and observational study Study of data Econometrics