MUMBAI: 26 Nov 2023 RBI governor

Shaktikanta Das, highlighted the vulnerability

of headline inflation to both domestic and
international factors.
India's retail inflation, which is
measured by the consumer price index
(CPI), eased to a four-month low
of 4.87% in Oct. 2023, from 5.02% in .
• 26 Nov 2023 ;Toyota Kirloskar Motor
Executive Vice President & Country
Head Vikram Gulati said the current
shift towards SUVs will continue to
happen next year with more consumers
willing to pay an additional amount for
better features and safety.
• New Delhi: 26 Nov 2023 India's economic growth prospects should remain strong
over the medium term, with GDP expanding 6-7.1 per cent annually in fiscal years
2024-2026, S&P Global Ratings said
• India's GDP is projected to reach $4.2 trillion in FY24. However, it still needs to
achieve a 9.1% average growth to become the third largest economy by 2027,
reaching the $5 trillion mark, and surpassing Japan as the fourth Brisk digital
transformation and a rapidly growing middle class are expected to drive India's
growth, lifting its economy to the third place by 2030, according to S&P Global
Market Intelligence. This will put it behind only the US and China, overtaking
Germany and Japan.

The economy will more than double to $7.3 trillion over this period, from $3.5 trillion
in 2022, the financial information services firm said .
Dr,Ravikeerthi JV
Associate Professor
Director - Placements

BE (Electrical): RV College of Engineering

MBA: Canterbury Christ Church University (London)
M Phil: Sri Vinayaka Mission University
DIM, DHRM (IGNOU)
PhD in Marketing management

Age: 63 years
Mb: 9742619734
 Economics
• Economics is a study of man in the
ordinary business of life.
• It enquires how he gets his income
and how he uses it.
 MANAGERIAL
MANAGERIAL
ECONOMICS
ECONOMICS

DEFINITION
NATURE,SCOPE & SIGNIFICANCE
• Economics
• Economics is the branch of
knowledge concerned with the
production, consumption, and
transfer of wealth.
• Economics is the study of the
production, distribution and
consumption of goods and services.
• Managerial economics is a branch of
economics involving the application
of economic methods in the
managerial decision-making process.
• Economics is the study of how things are made, moved
around, and used.
• It looks at how people, businesses, governments, and
countries choose to use their resources.
• Economics is the study of how people act, based on the
idea that people act rationally and try to get the most
value or benefit.
• Economics is the study of how work and business are
run. Since there are many ways to use human labour
and many ways to get resources, it is the job of
economics to figure out which ways produce the best
results.
 DEFINITIONS OF MANAGERIAL ECONOMICS

• Mansfield defines,”Managerial Economics is concerned

with application of economic concepts & economic
analysis to the problems of formulating rational
managerial decisions.”
• Spencer & Siegelman define ,”Managerial Economics
as the integration of economic theory with business
practice for the purpose of facilitating decision-
making & forward planning by management.”
• E.J.Douglas,” Managerial Economics seeks to establish
rules & principles to facilitate the attainment of the
desired economic goals of
management.”
 Basic concepts/principles in
Economics
• Concept of scarcity
The starting point of any economic analysis is
the existence of human wants. Human wants
are unlimited means to satisfy them are
limited.
Any economic problem consist of making
decisions regarding the ends to be pursued
and the goods to be used for achievement of
such ends.
• In general, economics can be broken
into two parts:
• macroeconomics, which looks at how
the economy works, and
• microeconomics, which looks at how
people and businesses work.
• There is a connection between microeconomics
and macroeconomics. The sum of all
microeconomic events makes up an aggregate
macroeconomic event.
• But these two areas of economics use very
different theories, models, and research
methods that can make them seem to go against
each other.
• Many economists study how to put together the
basics of microeconomics with macroeconomics
into theory and research.
• The two main purposes of managerial economics are:
• To optimize decision making when the firm is faced with
problems or obstacles, with the consideration and
application of macro and microeconomic theories and
principles.
• To analyze the possible effects and implications of both
short and long-term planning decisions on the revenue and
profitability of the Business.
• The core principles that managerial economist use to
achieve the above purposes are:
– monitoring operations management and performance,
– target or goal setting, and
– talent management and development.
 Nature of Managerial
Economics
• It includes:
• Planning
• Decision Making
• Demand Analysis & Forecasting
• Cost & Production Analysis
• Pricing Policy
• Capital Management
• Sales Maximisation
• Profitmaking
 ROLE & RESPONSIBILITES OF A MANAGERIAL
ECONOMIST

• Responsibilities
• Service toSociety
• Role • Good Corporate
• Profit Making citizenship
• Sales Maximisation
• National Priorities
• Cost Minimisation
• Avoidance of
• Financial Management
profiteering & anti-
• Innovations & Risk-bearing
• Long-run Survival
social practices
• Demand Forecasting • Export Promotions
• Market Expansion
• Market Leadership
 Scope of Managerial
Economics
• Theory of demand.
• Theory of production.
• Theory of exchange or price theory.
• Theory of profit.
• Theory of capital and investment.
• Environmental issues.
 Concept of opportunity
cost
• Opportunity cost is the benefit foregone from the
alternative that is not selected.
• According to Benham, “The opportunity cost of
anything is the next best alternative which could be
produced instead by the same factors or by equivalent
group of factors, costing the same amount of money.”
• Opportunity cost means the cost of foregone
opportunities.
• Opportunity cost of a product or service means the
revenue earned by the product or service if put to
alternative use.
 Principle of incremental
cost/revenue
• Incremental cost is the differential cost that must be
incurred if a decision is taken and that need not be
incurred if the same is not executed.
• Incremental cost may be defined as the change in
total cost due to a specific decision.
• Similarly incremental revenue is change in the revenue
caused by particular decision.
• When incremental revenue exceeds incremental cost
decision is profitable.
• This concept helps in arriving a better decision
comparing between incremental cost and incremental
revenue.
 Principle of marginalism
• The concept of marginalism finds its origin in scarcity
of resources .
• Scarce resources have to be allocated very carefully.
• For deciding whether an additional labour has to be
employed or not one has to know additional output
expected there from.
• This gives rise marginal revenue and marginal cost
concepts.
• As long as MR>MC the firm generates profit. It will
stop employing more labourers at the point where
MC=MR.
• If production is carried beyond this point the firm is
going to face loss.
 Principle of equi-
marginalism
• The equi-marginal principle is a widely used
concept in economics and is significant in
determining optimal condition in resource
allocation.
• The equi-marginal principle states that an input
should be allocated in such a way that the value
added by last unit of input is the same in all its
uses. Symbolically, it can be stated as follows:
• VMPLA=VMPLB=VMPLC where
• VMPL: Value of marginal product of labour.
• A,B,C,=Three activities
• Note: Equi-marginal principle can operate
under ideal conditions.
 TIME PERSPECTIVE
• Economists have divided time periods in four periods
(i) Market period, (ii) Short period, (iii) Long period,
(Iv) Secular period (Very long period).

• Market period is characterised by fixed supply of

output. Output cannot be increased in response to
demand.
•
• Supply can be increased by increasing variable factors
in short run but fixed factors cannot be changed.

• In long-run all factors can be altered to suit the

demand and hence all factors are variable.
•
Discounting principle
The concept of discounting principle is based on the simple
principle that a rupee today is worth more than rupee
tomorrow.
• This is because future is uncertain.
• Hence whenever the present value of a business has to be
known the future values has to be discounted.
• This present value is known as discounted value.
• For example: if a person has Rs 100 today as against Rs
100 next year he will prefer Rs 100 today as against
tomorrow. This is because future is uncertain. Secondly @
10% per year the person can earn Rs 110 at the end of
year. Had he opted for Rs 100 next year he would have
suffered a loss of Rs 10. The present value of Rs 100 one
year hence would be less than Rs 100 today.
• Businesses need to bother about discounting. This is because most
of the business relate to outflow and inflow of money and resources
that takes place at different points of time. Most of the outflow
currently occur in the current period, whereas inflows occur only in
future, therefore in order to take right decision it is necessary to
“discount” future inflows to their present value level. The simple
formula for discounting is :
• PVF= 1/(1+r )n
• Where PVF=Present value of fund, n=period and r=rate of
discount/interest
• Let us summarise the underlying logic as follows:
• Re 1 now is worth Rs (1+r) in one year’s, time if rate of interest is r.
• Re 1 in one years time is worth Rs1/(1+r) or Re 0.91 now if rate of
interest r is 10%
• Re 1 in two year’s time is worth Rs 1/(1+r)2 or if the rate of interest
r is
Production possibilities curve
(PPC)
• The production possibilities curve
(PPC) is a graph that shows all of the
different combinations of output
that can be produced given current
resources and technology.
• Sometimes called the production
possibilities frontier (PPF), the PPC
illustrates scarcity and tradeoffs.
• In microeconomics, a production–
possibility frontier (PPF), production
possibility curve (PPC), or production
possibility boundary (PPB) is
a graphical representation showing all
the possible options of output for
two goods that can be produced using
all factors of production, where the
given resources are fully and
efficiently utilized per unit time.
• This tradeoff is usually considered
for an economy, but also applies to
each individual, household, and
economic organization.
• One good can only be produced by
diverting resources from other
goods, and so by producing less of
them.
Research and Analysis :
Conducting economic research to
understand trends, patterns, and
phenomena.
Analyzing data to derive meaningful
insights and draw conclusions.
Policy Analysis:
Evaluating the impact of existing economic
policies and proposing new policies.
Assessing the potential consequences of policy
changes.
Market Analysis:
Studying supply and demand dynamics in
various markets.
Analyzing market structures, competition,
and pricing strategies.
• Financial Analysis:
– Evaluating the financial performance of
companies or industries.
– Assessing investment opportunities and
risks.
• Macroeconomic Forecasting:
– Predicting trends in national or global
economies.
– Forecasting indicators like GDP growth,
inflation, and unemployment.
• Public Finance and Budgeting:
– Analyzing government spending and
revenue policies.
– Assessing the fiscal impact of
government programs.
• International Trade and Finance:
– Studying the dynamics of global trade,
tariffs, and trade agreements.
– Analyzing foreign exchange rates and
their impact on international
transactions.
• Environmental Economics:
– Analyzing the economic impact of
environmental policies and regulations.
– Assessing the value of natural resources
and ecosystem services.
• Consulting:
– Providing economic expertise and advice
to businesses, government agencies, or
non-profit organizations.
– Offering recommendations for strategic
decision-making.
• Entrepreneurship and Startups:
– Launching and managing businesses,
applying economic principles to decision-
making.
– Conducting market research to identify
opportunities and challenges.
• The family is a
remarkable institution.
And a complex one.
Indeed, so complex that
much of economic theory
proceeds as if no such
thing exists.
• Amarthya Sen
• Economic family refers to a group of two
or more persons who live in the same
dwelling and are related to each other by
blood, marriage, common-law union,
adoption or a foster relationship.
• By definition, all persons who are
members of a census family are also
members of an economic family.
• Families are also economic units that
share consumption, coordinate work
activities, accumulate wealth and invest
in children.
• Indeed, Aristotle adds that "The family
is the association established by nature
for the supply of menís everyday wants".
• Amartya Sen, (born
November 3, 1933,
Santiniketan, India),
Indian economist who was
awarded the 1998 Nobel
Prize in Economic
Sciences for his
contributions to welfare
economics and social
choice theory and for his
interest in the problems of
society's poorest members
• The family economic unit has always
been dependent on specialized labor
done by family members.
• The family was a multi-generational
producer with capital and land
provided by older generations and
labor provided by younger generations.
• Family economics applies economic concepts
such as production, division of
labor, distribution, and decision making to
the family.
• It is used to explain outcomes unique to
family—such as marriage, the decision to have
children, fertility, time devoted to domestic
production, and dowry payments using
economic analysis.
• Access to basic necessities —
housing, food, clothing, medical and
behavioral health care services, legal
representation, transportation, and
early care and education — is
fundamental to the well-being and
economic success of every family.
The 5 sources of family income
• The five sources of family income are
– wages and salaries, self-employment
income, government transfer payments,
investment income and other income.
• Explanation: Family income refers to
any income generated by working
• 8 Tips to Effectively Manage the Family Budget
• Know your income and expenses. ...
• Set a budget. ...
• Prioritize your spending. ...
• Make a plan for unexpected expenses. ...
• Cut back on unnecessary spending. ...
• Make saving a priority. ...
• Use credit wisely. ...
• Review your family budget regularly.
 Firm
• A firm is a business organisation such as a
corporation that produces and sells goods
and services with the aim of generating
revenue and making a profit.
• A firm is a for-profit business organization
—such as a corporation, limited liability
company (LLC), or partnership—that
provides professional services.
• A firm may use natural, capital, or people-
related resources to generate operational
success.
• the industry is something entirely different
from a firm. There are typically many firms
within an industry, and all combined
industries making up the economy.
• A single industry consists of all firms that
output a specific product or service. This
includes three broad ‘categories’: retail
industries, in which firms sell products to
customers directly; wholesale, in which
firms trade products with other firms; and
service industries, which offer services to
both businesses and individuals.
• In economics, firms are organizations that produce
goods and services. They are typically owned and
operated by individuals or groups of individuals, and
are motivated by the desire to make a profit.
• They play a crucial role in the functioning of
market economies by:
• allocating resources
• producing goods and services
• providing employment opportunities
Economic transactions are the exchange of
goods, services, or resources between
individuals or entities.
These transactions are the foundation of
economic activity and can take many forms,
such as:
• buying and selling goods in a market
• trading shares of stock on a stock exchange
• providing services to a customer
These transactions are coordinated through a
variety of mechanisms, including markets,
institutions, and government policies.
• Examples of Firms
• Entrepreneurs working for themselves: A self-
employed individual who owns and runs their own
company.
• A private company: Typically small to medium in size
(SME), these companies are usually owned by a small
group of individuals and seek to maximize profits.
• A public limited company, or PLC: These are usually
large companies that have floated on the stock
market. Members of the public may buy individual
shares in these companies and thus gain from any
profits made.
• Co-operatives or social ventures: These are
companies that don’t aim to maximize their profits,
but rather seek to achieve goals for social or
economical benefit.
• Companies owned by the government: In specific
sectors, some of the largest companies are owned by
the government. For example, state-owned postal
services and utility companies.
• One of the key concepts in the
theory of the firm is the concept of
the firm as a decision-making unit,
which is guided by the goal of
maximizing profits or shareholder
value.
• The theory also addresses questions
such as why firms exist, how they are
structured, and how they make
decisions.
• Firms are one of the three crucial elements in
the circular flow of money through the
economy.
• They take money for goods and services while
providing an income to skilled workers through
a salary.
• They also pay taxes to the government, and, in
turn, benefit from government spending in key
areas (e.g. infrastructure).
 Circular Flow of Income
• The circular flow means the unending flow
of production of goods and services,
income, and expenditure in an economy.
• It shows the redistribution of income in a
circular manner between the production
unit and households.
• These are land, labour, capital, and
entrepreneurship.
 Porter's five forces
• Porter's five forces is a framework for the
industry analysis and business strategy
development .
• Three of Porter's five forces refer to
competition from external sources. The remainder
are internal threats. It is useful to use Porter's
five forces in conjunction with SWOT analysis.
• Porter referred to these forces as the micro
environment, to contrast it with the more general
term macro environment.
• They consist of those forces close to a company
that affect its ability to serve its customers and
make a profit
Porters five forces
 STRATEGY FORMULATION

Porter’s Five Forces