managerial economics

- Prof. Prasad Joshi

24 August 2011 Prof. Prasad Joshi

�  When wants exceed the resources available to satisfy them, there is scarcity

�  Faced with scarcity, people must make choices

�  Economics is the study of the choices people make to cope with scarcity

�  Choosing more of one thing means having less of something else

�  The opportunity cost of any action is the best alternative forgone


The study of the decisions of people and businesses and the interaction of those decisions in markets. The goal of microeconomics is to explain the prices and quantities of individual goods and services.


The study of the national economy and the global economy and the way that economic aggregates, grows and fluctuates. The goal of macroeconomics is to explain average prices and the total employment, income, and production.


Production costs are as low as possible and consumers are as satisfied as possible with the combination of goods and services that is being produced.


The increase in incomes and production per person. It results from the ongoing advance of technology, the accumulation of ever larger quantities of productive equipment and ever rising standards of education


The absence of wide fluctuations in the economic growth rate, the level of employment, and average prices


A mechanism that allocates scarce resources among alternative uses. This mechanism achieves five things: What, How, When, Where, Who


�  Household - Any group of people living together as a decision-making unit. Every individual in the economy belongs to a household

�  Firm - An organization that uses resources to produce goods and services. All producers are called firms, no matter how big they are or what they produce. Car makers, farmers, banks, and insurance companies are all firms


�  Government - A many-layered organization that sets laws and rules, operates a law-enforcement mechanism, taxes households and firms, and provides public goods and services such as national defense, public health, transportation, and education

�  Market - Any arrangement that enables buyers and sellers to get information and to do business with each other


�  Land - Natural resources used to produce goods and services. The return to land is rent

�  Labor - Time and effort that people devote to producing goods and services. The return to labour is wages

�  Capital - All the equipment, buildings, tools and other manufactured goods used to produce other goods and services. The return to capital is interest

�  Entrepreneurial ability - A special type of human resource that organizes the other three factors of production, makes business decisions, innovates, and bears business risk. Return to entrepreneurship is profit.


managerial economics

Education

prasad joshi

public goods

goods andservices

othermanufactured goods

toproducing goods

decisions of people

choices people

quantities ofindividual