Managerial Economics

12384 Words Dec 31st, 2012 50 Pages
|Managerial Economics |
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|UNIT -I |
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|[Pick the date] |
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Concept of Managerial Economics
The discipline of
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- Spencer and Siegelman:
"concerned with application of the economic concepts and economic analysis to the problems of formulating rational managerial decision." - Edwin Mansfield
SCOPE OF MANAGERIAL ECONOMICS
The scope of managerial economics includes following subjects:
1. Theory of demand
2. Theory of production
3. Theory of exchange or price theory
4. Theory of profit
5. Theory of capital and investment
6. Environmental issues, which are enumerated as follows:
1. Theory of Demand: According to Spencer and Siegelman, “A business firm is an economic organisation which transforms productivity sources into goods that are to be sold in a market”.
a. Demand analysis: Analysis of demand is undertaken to forecast demand, which is a fundamental component in managerial decision-making. Demand forecasting is of importance because an estimate of future sales is a primer for preparing production schedule and employing productive resources. Demand analysis helps the management in identifying factors that influence the demand for the products of a firm. Thus, demand analysis and forecasting is of prime importance to business planning.
b. Demand theory: Demand theory relates to the study of consumer behaviour. It addresses questions such as what incites a consumer to buy a particular

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