Managerial Economics-byDr. Shradha Malhotra BangaWeb blog: drshradhabanga.jimdo.com Mail id: shrdha.malhotra@sharda.ac.in

About the InstructorShradha M BangaAcademic QualificationPh.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 Course6 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)

BookNick Wilkinson: Managerial Economics: A

Problem Solving Approach: Cambridge University Press: 2005

(available for free download at

http://www.railassociation.ir/Download/Article/Books/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 produceHow to produce andFor whom to produce..

Activity:In Greater NOIDA you want to construct

Water Park..How would you make the strategy..

Managerial EconomicsA 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 theoryDecision SciencesBusiness Functions

Economic theoryThe main branch of economic theory with

which managerial economics isrelated is microeconomics, which deals

essentially with how markets workand interactions between the various

components of the economy

Micro Economics and Managerial EconomicsThere 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 SciencesThe 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 FunctionsRelationship 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 operations2 marketing3 finance and accounting4 human resources

Global Warming: A ProblemCan Managerial Economics Solve this issueSolution: Kyoto Protocolhttps://www.youtube.com/watch?v=yXRGwH

Zxi6A

Elements/Areas of Managerial EconomicsStarting point Obj of Business

Pricing: Demand and Cost theoryConsumer theory and Production theoryTheory of firm & Competition theoryGovernment policy for above

Methods to make DecisionsMake objectiveStudy theories:

scientific theories are positive and normativeEmpirical observation: real world observationEmpirical study can be

Experimental/controllable or Observational Example : Lab experiment and market experiment

Econometrics

Managerial EconomicsThus 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 ModelThe 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 awaysEconomic theory: describes the relationship

betweens between phenomenon that we observe

Good Theory makes testable predictionsPositive and Normative StudyEmpirical StudyExperimental Study and observational studyStudy of dataEconometrics