Economic analysis fundamentals (1)
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Transcript of Economic analysis fundamentals (1)
MANAGERIAL ECONOMICS
IS THE INTEGRATION OF ECONOMIC THEORY WITH
BUSINESS PRACTICE
FOR
THE PURPOSE OF
DECISION MAKING AND FORWARD PLANNING
BY THE MANAGEMENT
BASIC INGREDIENTS:
ECONOMICS PROVIDES A SET OF CONCEPTS
THESE CONCEPTS FURNISH THE MANAGER WITH
TOOLS AND TECHNIQUES OF ANALYSIS
ECONOMIC ANALYSIS IS AN AID
TO
UNDERSTAND
BUSINESS PRACTICES
IN A GIVEN ENVIRONMENT AND THEREBY MAKE BUSINESS DECISIONS WHICH ARE PRIMARILY ECONOMIC IN NATURE
DECISION MAKING IS A BASIC FUNCTION OF MANAGEMENT
ECONOMICS THEREFORE IS A VALUABLE INPUT
IN A DECISION MAKING PROCESS OF MANAGEMENT
SIX STEPS TO DECISION MAKING
• DEFINE THE PROBLEM
• DETERMINE THE OBJECTIVES
• EXPLORE THE OBJECTIVES
WHAT IS ECONOMICS?
• OBJECTIVE FUNCTION
• LIMITED RESOURCES
• ALTERNATIVE USES
• OPTIMAL ALLOCATION OF RESOURCES
• FEASIBILITY AND OPTIMALITY
ECONOMIC ANALYSIS-
• STATIC
• COMPARATIVE STATIC
• DYNAMIC
ECONOMIC ANALYSIS IS THE BASIS OF ECONOMIC POLICY
BUSINESS DECISIONS:
ESSENCE OF AN ECONOMIC DECISION IS THE
SOLUTION TO AN ECONOMIC PROBLEM
PROBLEM OF CHOICE
ECONOMIC DECISION MAKING
NATURE OF DECISIONS:
• INTUITIVE AND SCIENTIFIC
• STRATEGIC AND TACTICAL
• DECISIONS UNDER VARYING DEGREES OF
UNCERTAINTY
SCOPE AND STRUCTURE OF ECONOMIC ANALYSIS:
• DEMAND ANALYSIS-
-STRUCTURE OF DEMAND –
-SENSITIVITY OF DEMAND TO VARIOUS PARAMETERS SUCH AS PRODUCT PRICE, CONSUMERS’ INCOME, PRICES OF OTHER PRODUCTS, ADVERTISEMENTS ETC.
-DEMAND FORECASTING
• COST ANALYSIS
• PRODUCTION ANALYSIS
• OBJECTIVES OF A BUSINESS FIRM
• PRICING AND OUT PUT DECISIONS UNDER
ALTERNATIVE MARKET STRUCTURES
• INVESTMENT ANALYSIS
• ECONOMIC POLICY FRAMEWORK
• NATIONAL INCOME AGGREGATES
• BUSINESS ENVIRONMENT
• MODELS OF INCOME DETERMINATION
• MONEY MARKET
• CAPITAL MARKET
• FOREIGN EXCHANGE MARKET
• FISCAL AND MONETARY POLICIES
FUNDAMENTAL CONCEPTS:
• FUNCTIONAL RELATIONSHIPS
• DERIVATIVES AND RELATED CONCEPTS
• MARGINAL ANALYSIS
• CONCEPT OF TIME PERSPECTIVE
ROLE OF A BUSINESS ECONOMIST:
• NATIONAL AND INTERNATIONAL LEVEL STUDIES
• INDUSTRY LEVEL STUDIES
• PRODUCT LINE RESEARCH
• SALES FORECASTING
• ECONOMIC ANALYSIS OF COMPETING COMPANIES
• PRICING PROBLEMS OF INDUSTRY