There are different methods for setting advertising budget: Percentage of Sales Approach, All You can Afford Approach, Competitive Parity Approach, Objective and Task Approach and Return on Investment Approach. A seller with market power will have the freedom to choose suppliers, set prices and influence demand. Solow used the interpretation that technology in the production function is superficial. Final goods are those goods which are directly consumed and not used in further production process. The electronic gadgets will enable the manager to understand business problems in a better perspective and increase his ability to solve the business problems facing him in the management of business. A managerial economist cannot apply experimental methods to the same extent and in the same way as a physicist can in physical sciences. The market equilibrium is the quantity and associated price at which there is concurrence between sellers and buyers.
Role and Responsibility of a Managerial Economist: With the advent of managerial revolution and transition from the owner- manager to the professional executive, the managerial economists have occupied an important place in modern business. This function is being done by managerial economics. This process further results in increase in demand and decrease in supply until the market price equals the equilibrium price. It is neither free nor barred. Economists tell us that profits are the reward for uncertainty bearing and risk taking. This means that the long-term rate of national growth is determined outside the model and is independent of preferences and most aspects of the production function and policy measures. The managerial economist should recognise his responsibilities to make successful forecast.
The main objective of accounting function is to record, classify and interpret the given accounting data. Demand for Managerial Economics The demand for this subject has increased post liberalization and globalization period primarily because of increasing use of economic logic, concepts, tools and theories in the decision making process of large multinationals. Time lags in the flow of information can also create problems in terms of response time to changing market condition. Question: How to organize the system which promotes the most efficient use of resources? The equilibrium condition differs under perfect competition, monopoly, monopolistic competition, and oligopoly. The scientific method is the method for which Analytic Services Incorporated. Accurate estimation of demand, by analyzing the forces acting on demand of the product forms the important decision at the firm level.
The investment projects team needs an appropriate rate at which to discount the estimated after-tax cash flow for the investment. When a company reduces costs and increases production, internal economies of scale are achieved. Thus, the value of the firm is the discounted present value of the stream of expected future profits. A higher degree leads to a higher purpose. It includes techniques for analysing changes in total output, total employment, the consumer price index, the unemployment rate, and exports and imports.
The control functions of an enterprise are not only productions but pricing as well. Nature and Scope of Managerial Economics The most important function in managerial economics is decision-making. It considers the time value of money along cash flows generated by the project. The objective is to assure the most profitable use of funds, which means that funds must not be applied when the managerial returns are less than in other uses. In Economy Policies Macroeconomics is very useful in an economic policy. Business and industrial enterprises have to undergo various decisions that entail managerial issues and decisions. The experimental methods are of limited use to managerial economics.
Kalavathi as well as of Dr. If demand is price inelastic, an increase in price will lead to increase in revenue because the percentage increase in price will cause a smaller decrease in quantity demand. As mentioned above, the managerial economist has an important role to play. Cost Concepts Costs play a very important role in managerial decisions especially when a selection between alternative courses of action is required. Managerial economics also called business economics , is a branch of economics that applies microeconomic analysis to specific business decisions. Thus, the study of individual units is not possible without macroeconomics.
The tools and techniques of economics are employed to facilitate policy, analytic and management decisions in the health care field. A business can use a variety of pricing strategies when selling a product or service. This has given rise to the necessity of recording business transaction in books. Hence managerial economics is economics applied in decision making. Variable costs are corporate expenses that vary in direct proportion to the quantity of output. Theory of Production In economics, production theory explains the principles in which the business has to take decisions on how much of each commodity it sells and how much it produces and also how much of raw material ie. Accurate estimation of demand, by analysing the forces acting on demand of the product produced by the firm, forms the vital issue in taking effective decision at the firm level.
In this connection, an important point worth considering is the element of uncertainty existing about profits. There are managerial and behavioral. There are different methods for setting advertising budget: Percentage of Sales Approach, All You can Afford Approach, Competitive Parity Approach, Objective and Task Approach and Return on Investment Approach. Managerial Economics micro- economic in character. Optimization techniques are very crucial activities in managerial decision-making process. Replacement and Historical Costs Historical cost of an asset states the cost of plant, equipment, and materials at the price paid originally for them, while the replacement cost states the cost that the firm would have to incur if it wants to replace or acquire the same asset now.
These may be decisions with regard to customers, suppliers, competitors or the internal working of the organization. Scope of Managerial Economics Demand analysis and forecasting When a business manager decides to venture into a business, the very first thing he needs to find out is the nature and amount of demand for the product, both at present and in the future. Problems can be related to various departments in a firm like production, accounts, sales, etc. It is concerned with those analytical tools which are useful in improving decision making. Hence, it is advisable to be well prepared to tackle these areas. A wise manager would prepare cost estimates of a range of output, identify the factors causing variations in costs and choose the cost-minimising output level, taking also into consideration the degree of uncertainty in production and cost calculations.
Following these suggestions will ensure that you write a coherent and well-structured paper. A correct pricing policy makes a firm successful, while incorrect pricing may lead to its elimination. The same level of output can be produced by various combinations of factor inputs. The subject offers powerful tools and techniques for managerial policy making. He must be alert to new developments both economic and political in order to appraise their possible effects on business.