3.RELATION TO OTHER BRANCHES OF KNOWLEDGE.pptx

3.RELATION TO OTHER BRANCHES OF KNOWLEDGE.pptx

1. RELATION TO OTHER BRANCHES OF KNOWLEDGE

2. Managerial Economics & Economics Managerial Economics has been described as economics applied to decision making . It may be studied as a special branch of economics, bridging the gap between economic theory and managerial practices/actions.

3. Managerial Economics & Theory of Decision Making Decision making is a basic part of today’s business management. Economists are interested in the efficient use of scarce resources. Therefore they are naturally interested in learning how to solve business decision problems and how to apply economics theory in business problems. Hence managerial economics is economics applied in business decision making.

4. Managerial Economics and Statistics Statistics is important to managerial economics. A successful businessman/manager must know how to gather and handle the real life data. He must correctly estimate the demand for his product . He should be able to analyses the impact of changes in tastes, fashion , income and advertisement expenditures on demand only then he can adjust his output/production for minimizing cost and maximizing profits.

5. THEORY OF THE FIRM Most business projects take place within firms. A firm is any business that hires resources and produce goods and services and pay rewards to resource owners. People who are directly involved with firms include customers, stockholders, management, employees, suppliers and sometimes society and government. The primary goal of firm is profit maximization in short run but in long run the goal is to maximize the value of the firm. The value of the firm is defined as the present value of expected future profits .

6. Whenever manager makes any decision, he has to predict its effect over future profits and whether it will add to the value of the firm. All firms aim for achieving this goal but now a days it is said that firms have some other goals too. For example, Firstly, Sometimes firms only aim to produce satisfactory level of profits rather than maximum profits. Secondly, sometimes firms aim to maximize total sales.

7. Thirdly, sometimes firms aim to fulfill their Social Responsibly of business. They try to improve quality and introduce new products by research and development. To summarize, the firm’s value maximization is not the only goal of managerial actions but it’s the best possible explanation of the private firm’s practices and objectives.