Managerial Economics (MBA - I Semester Paper Code: MBAC Managerial EconomicsO) Download PDF. Downloading. Anagerial Economics, Cengage Learning, Newdelhi, Geetika, Ghosh & Choudhury,, 4. Managerial Economics by G Geetika, , available at Book Depository with free delivery worldwide. ECONOMICS FOR MANAGERS. olerivatcu.cfTTA and precepts;Managerial economics: its uses& . Managerial Economics, Geetika,. Piyali Ghosh, Purba.
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General Foundations of Managerial Economics - Economic Approach. - Circular Flow of Anagerial Economics, Cengage Learning, Newdelhi, Geetika. Students can Download MBA 1st Sem Managerial Economics Notes Pdf Anagerial Economics, Cengage Learning, Newdelhi, Geetika. MBA programme in India. Managerial Economics. Geetika,Piyali Ghosh & PurbaRoy Choudhury. First Reprint(),. Tata McGraw-Hill Publishing Company.
Managerial Economics PG 3 III The primary objective of this course is to acquaint the students with concepts and techniques used in Economics and to enable them to apply the knowledge in business decisions making. Emphasis is given to changes in the nature of business firms, in the context of Management of Services and Globalization. Basic concepts of management, economics and finance.
Theories of demand and Law of Supply. Consumer Preferences and consumers Surplus.
Demand Forecasting. The theory of the firm. The Objectives and value of the Firm. Constraints on the Operation of the Firm. Firm and industry demand: firm demand is the demand for the productof a particular firm. Total market and market segment demand: a particular segment ofthe markets demand is called as segment demand example: demand for 20 laptops by engineering students the sum total of the demand for laptops byvarious segments in India is the total market demand.
Short run and long run demand: short run demand refers to demand withits immediate reaction to price changes and income fluctuations. Long rundemand is that which will ultimately exist as a result of the changes inpricing, promotion or product improvement after market adjustment withsufficient time. Joint demand and Composite demand: when two goods are demanded inconjunction with one another at the same time to satisfy a single want, itis called as joint or complementary demand.
Price demand, income demand and cross demand: demand forcommodities by the consumers at alternative prices are called as pricedemand. Quantity demanded by the consumers at alternative levels ofincome is income demand. Price Demand: The ability and willingness to buy specific quantities of agood at the prevailing price in a given time period. Income Demand: The ability and willingness to buy a commodity at theavailable income in a given period of time.
Market Demand: The total quantity of a good or service that people arewilling and able to buy at prevailing prices in a given time period. It is thesum of individual demands. Cross Demand: The ability and willingness to buy a commodity orservice at the prevailing price of the related commodity i. For example, people buy more of wheat whenthe price of rice increases. The law of demand does not apply in every case and situation. Thecircumstances when the law of demand becomes ineffective are known asexceptions of the law.
Some of these important exceptions are as under. Giffen Goods: Some special varieties of inferior goods are termed as Giffen goods. Cheaper varieties millets like bajra, cheaper vegetables like potato etc comeunder this category. Sir Robert Giffen of Ireland first observed that peopleused to spend more of their income on inferior goods like potato and lessof their income on meat.
After purchasing potato the staple food, they didnot have staple food potato surplus to buy meat. So the rise in price ofpotato compelled people to buy more potato and thus raised the demandfor potato.
This is against the law of demand. This is also known as Giffenparadox. A few goods like diamonds etc arepurchased by the rich and wealthy sections of society. The prices of thesegoods are so high that they are beyond the reach of the common man.
Thehigher the price of the diamond, the higher its prestige value. So whenprice of these goods falls, the consumers think that the prestige value ofthese goods comes down. So quantity demanded of these goods falls withfall in their price. So the law of demand does not hold good here.
Conspicuous Necessities: Certain things become the necessities of modern life. So we haveto purchase them despite their high price. The demand for T. These things have become the symbol of status. Sothey are purchased despite their rising price. This is especially true,when the consumer believes that a high-priced and branded commodity isbetter in quality than a low-priced one. Emergencies: During emergencies like war, famine etc, households behave in anabnormal way.
Households accentuate scarcities and induce further pricerise by making increased purchases even at higher prices because of theapprehension that they may not be available.
On the other hand duringdepression, , fall in prices is not a sufficient condition for consumers todemand more if they are needed. Future Changes In Prices: Households also act as speculators. When the prices are risinghouseholds tend to purchase large quantities of the commodity out of theapprehension that prices may still go up.
When prices are expected to fallfurther, they wait to buy goods in future at still lower prices. So quantitydemanded falls when prices are falling. Change In Fashion: A change in fashion and tastes affects the market for a commodity. When a digital camera replaces a normal manual camera, no amount ofreduction in the price of the latter is sufficient to clear the stocks. Digitalcameras on the other hand, will have more customers even though its pricemay be going up.
The law of demand becomes ineffective. Demonstration Effect: It refers to a tendency of low income groups to imitate theconsumption pattern of high income groups. They will buy a commodityto imitate the consumption of their neighbors even if they do not have thepurchasing power.
Snob Effect: Some buyers have a desire to own unusual or unique products toshow that they are different from others. In this situation even when theprice rises the demand for the commodity will be more. Whenever the prices rise, the traders expect the prices to rise further sothey buy more.
Goods that go out of use due to advancement in the underlyingtechnology are called outdated goods. The demand for such goods doesnot rise even with fall in prices Seasonal Goods: Goods which are not used during the off-season seasonal goods will also be subject to similar demand behaviour. Goods In Short Supply: Goods that are available in limited quantity or whose futureavailability is uncertain also violate the law of demand.
Elasticity Of Demand In economics, the term elasticity means a proportionate percentage change in one variable relative to a proportionate percentage change inanother variable. The quantity demanded of a good is affected by changesin the price of the good, changes in price of other goods, changes in incomeand changes in other factors. Elasticity is a measure of just how much ofthe quantity demanded will be affected due to a change in price or income.
Elasticity of Demand is a technical term used by economists todescribe the degree of responsiveness of the demand for a commoditydue to a fall in its price.
A fall in price leads to an increase in quantitydemanded and vice versa. The responsiveness of changes in quantity demanded due to changesin price is referred to as price elasticity of demand. The price elasticityof demand is measured by dividing the percentage change in quantitydemanded by the percentage change in price.
When there is afall in price to Rs. Thereforethe change in quantity demanded is12 units resulting from the change inprice of Rs. The two factors considered by economists arethe availability of substitutes and time. The better the substitutes for aproduct, the higher the price elasticity of demand..
The longer the periodof time, the more the price elasticity of demand for that product.
The priceelasticity of necessary goods will have lower elasticity than luxuries. The elasticity of demand depends on the following factors: 1. Nature of the commodity: The demand for necessities is inelastic because the demand does not change much with a change in price. But the demand for luxuries is elastic in nature. Extent of use: A commodity having a variety of uses has a comparatively elastic demand.
Range of substitutes: The commodity which has more number of substitutes has relatively elastic demand. A commodity with fewer substitutes has relatively inelastic demand. Income level: People with high incomes are less affected by price changes than people with low incomes. Proportion of income spent on the commodity: When a small part of income is spent on the commodity, the price change does not affect the demand therefore the demand is inelastic in nature.
For example medicines for any sickness should be purchased and consumed immediately. Durability of a commodity: If the commodity is durable then it is used it for a long period. Therefore elasticity of demand is high. Price changes highly influences the demand for durables in the market.
Time: In the short run demand will be less elastic but in the long run the demand for commodities are more elastic. The slope of each combination is depicted in thefollowing graphs. Income Elasticity Income elasticity of demand measures the responsiveness ofquantity demanded to a change in income. It is measured by dividing thepercentage change in quantity demanded by the percentage change inincome.
If the demand for food were unchanged whenincome increases, the income elasticity would be zero. A fall in demand fora commodity when income rises results in a negative income elasticity ofdemand. Unitary Income Elasticity: The change in income leads to the samepercentage of change in the demand for the good.
Income Elasticity is Greater than 1: The change in income increases thedemand for that commodity more than the change in the income. Income Elasticity is Less than 1: The change in income increases thedemand for the commodity but at a lesser percentage than the change inthe Income.
We can understand from the abovegraphs that the product which is highly elastic in nature will grow fasterwhen the economy is expanding. The performance of firms having lowincome elasticity on the other hand will be less affected by the economicchanges of the country. The income elasticityof demand is positive for superior goods or normal goods and negative forinferior goods since a person may shift from inferior to superior goodswith a rise in income. Cross elasticity measures theresponsiveness of the quantity demanded of a commodity due to changes inthe price of another commodity.
For example the demand for tea increaseswhen the price of coffee goes up. Here the cross elasticity of demand fortea is high. If two goods are substitutes then they will have a positive crosselasticity of demand. In other words if two goods are complementary toeach other then negative income elasticity may arise. The responsiveness of the quantity of one commodity demandedto a change in the price of another good is calculated with the followingformula. For example the price fall in Tata salt does not make any change in thedemand for Tata Nano.
Significance Of Elasticity Of Demand: The concept of elasticity is useful for the managers for the followingdecision making activities1.
In production i. Price fixation i. In distribution i.
In international trade i. In foreign exchange6. For nationalizing an industry7. In public finance 31 Demand Forecasting All organizations operate in an atmosphere of uncertainty butdecisions must be made today that affect the future of the organization. There are various ways of making forecasts that rely on logical methodsof manipulating the data that have been generated by historical events.
A forecast is a prediction or estimation of a future situation, under givenconditions. Demand forecast will help the manager to take the followingdecisions effectively. Define the nature of the forecasting problem 2. Explain the nature of the data under investigation 3. Describe the capabilities and limitations of potentially useful forecasting techniques.
Develop some predetermined criteria on which the selection decision can be made. Demand Forecasting Methods: 1. Delphi method 3. Expert opinion 4. Collective opinion 5. Smoothing techniques 7. Controlled experiments 9.
The following are various trend projections used under variouscircumstances. Tocalculate Y for any value of X we have to solve the following equations, i and ii. When forecasting trend series then, moving averages, simpleregression, growth curves, exponential models and autoregressiveintegrated moving average ARIMA models and Box-Jenkins methodscan be used.
When forecasting cyclical series econometric models, economicindicators, multiple regression and ARIMA models can be used. The causal forecasting models simple, multiple regressionanalysis will be useful to decide the production, personnel hiring, andfacility planning in the short run. In Time series forecasting models likedecomposition is suitable to decide the new plant, equipment planning.
Moving average and exponential smoothing is used for operations such asinventory, scheduling and pricing decisions.
The autoregressive models,Box-Jenkins techniques are used to forecast price, inventory, production,stock and sales related decisions. Neural network method is for forecastingapplications in development phase of the organization. Apart from the above mentioned statistical methods the survey methodsare also commonly used. They are: 1. Discretionary profit curve Assuming that the firm is producing an optimum level of output and the market environment is given, the discretionary profits curve is generated, shown in Fig 2.
It gives the relationship between staff expenditure and discretionary profits. It can be seen from the figure that profit will be positive in the region between the points B and C.
Beyond this if staff expenditure is increased due to increase in output, then a fall in the discretionary profits is noticed. Staff expenditure of less than B and more than C is not feasible as it wouldn't satisfy the minimum profit constraint and would in turn threaten the job security of managers.
Equilibrium of a firm in Williamson's Model To find the equilibrium in the model, Fig 1.