2. Managerial Economics
• ME is Pragmatic (Practical)
• Analyzing tools & techniques of economic
• Useful for Decision making
• DM is crucial aspect of dealing with business
problem
3. Micro Economics
• Small in Nature
• Study of decisions that people and businesses
make regarding the allocation of resources
and prices of goods and services
study of decisions that people and businesses
make regarding the allocation of resources
and prices of goods and services
4. Macroeconomics vs. Microeconomics
MICROECONOMIC MACROECONOMIC
NATURE
Analysis behavior of the Individual Analysis behavior of the Economy
METHEDOLGY
Study a particular economics Study a total shape ,size & function of
organization (Consumer / Producers) economics.
ECONOMIC VARIABLES National Income, Total Saving, total
Micro refer to Market DD,SS,Industry Consumption, total Investment,
Money SS, Growth Rate of economy
FIELD OF INTEREST
Problem of Pricing & Income Pretend to the prob of the size of
(Rent,wages,interest,profit.) National Income, economic growth,
Price Level.
5. Macroeconomics vs. Microeconomics
Microeconomics focuses on how decisions
are made by individuals and firms and the
consequences of those decisions.
Ex.: How much it would cost for a university
or college to offer a new course ─ the cost of
the instructor’s salary, the classroom facilities,
the class materials, and so on.
Having determined the cost, the school can
then decide whether or not to offer the course
by weighing the costs and benefits.
6. Macroeconomics vs. Microeconomics
Macroeconomics examines the aggregate
behavior of the economy (i.e. how the actions of
all the individuals and firms in the economy
interact to produce a particular level of economic
performance as a whole).
Ex.: Overall level of prices in the economy
(how high or how low they are relative to prices
last year) rather than the price of a particular
good or service.
7. Macroeconomic Policy
• In Microeconomics Government intervention
in the market usually leaves society worse off.
• In Macroeconomics there is a much wider role
for Government
– Fiscal Policy -fiscal policy is the use of government expenditure
and revenue - collection (taxation) to influence the economy
Governments use fiscal policy to influence the level of aggregate
demand in the economy, in an effort to achieve economic objectives of
price stability, full employment, and economic growth.
9. What Does Demand Mean?
An economic principle that describes a
consumer’s desire and willingness to pay a
price for a specific good or service. Holding all
other factors constant, the price of a good or
service increases as its demand increases and
vice versa.
10. Demand & Supply
• Demand refers to how much (quantity) of a product or service
is desired by buyers. The quantity demanded is the amount of
a product people are willing to buy at a certain price; the
relationship between price and quantity demanded is known
as the demand relationship.
• Supply represents how much the market can offer. The
quantity supplied refers to the amount of a certain good
producers are willing to supply when receiving a certain price.
The correlation between price and how much of a good or
service is supplied to the market is known as the supply
relationship. Price, therefore, is a reflection of supply and
demand.
11. Statement of the Law
• "The law of demand states that people will
buy more at lower prices and buy less at
higher prices, other things remaining the
same". Prof. Samuelson
• "Other things remaining the same, the
quantity demanded of a commodity will be
smaller at higher market prices and larger at
lower market prices". E. Miller
12. Law of Demand
• A microeconomic law that states that, all
other factors being equal, as the price of a
good or service increases, consumer demand
for the good or service will decrease and vice
versa.
13. Demand Curve
Price per shirt 100 80 60 40 20 10
Quantity demanded per
5 7 10 15 20 30
year
14. Assumption of law of demand
• No change in the income of the consumer prices
of related goods do not change
• Tastes & preferences of the consumer remains
the same
• Price of the goods remain the same
• No New entry substitute product
• Product is not of prestige value
• Change in population
• No climatic changes (weather)
15. Limitations/Exceptions
Law of Demand
• Prestige goods – Diamond, Sports cars
• Price expectations – Gold, Onion
• Ignorance of the consumer – No awarness
• Giffen goods - (good that experiences increased demand for
when the price rises and decreased demand for when the price falls.)
Vegetable ghee, Pure ghee
16. Monetary policy
• Monetary policy is the process by which the
monetary authority of a country controls the
supply of money, often targeting a rate of
interest for the purpose of promoting
economic growth and stability.
17. Long-Run Growth
• Macro considers the Long-run growth rate
• Micro focuses on the amount of output the
economy is capable of producing as given.
• Long-run growth depends on Economic
Aggregates
18. Core Concept
• Positive & Normative Approach
Positive economics can be described as “what
is, what was, and what probably will be”
economics. Statements are based on
economic theory rather than raw emotion
Normative statements are subjective - based on
opinion only - often without a basis in fact or
theory. They are value-laden, emotional
statements that focus on "what ought to be".
