The document defines key economic concepts like scarcity, resources, and economics. It explains that economics studies how societies manage their scarce resources to meet unlimited desires. Managerial economics specifically focuses on helping businesses efficiently utilize their scarce resources like labor, capital, and materials to maximize profitability. It is a microeconomic discipline that uses tools from both micro and macroeconomics. The scope of managerial economics includes demand analysis, production analysis, cost analysis, pricing and output determination, and profit management.

1. • Economy
 The word economy comes from a Greek word “for
one manages a household”.
• Society and Scarce Resources
 The management of society’s resources is important
because resource are scarce.
 Scarcity means that society has limited resources
and therefore cannot produce all the goods and
services people wish to have.
 Scarcity implies choice and choice implies cost.
Introduction

2. scarcity
Unlimited choice Limited resources
What to produce? How to produce? For whom to produce?

3. Economics : Science of scarcity
• Scarce resources for society :
- Land
- Labour (L)
- Capital (K)
- Skill
• Scarce resources of a business unit :
- Men
- Machine
- Material
- Money
- Mineral
• Unlimited desires : Profitability (∏)

4.  Economics is the study of how society manages its
scarce resources.
 Economics as a science is concerned with the problem
of allocation of scarce resources among competing
ends (Desires).
What is Economics

5. The Circular Flow of Economic Activity

6. • What is Managerial Economics
 Managerial economics is the branch of economics
which deals with managing the scarce resources of
a firm.
 Managerial economics uses the tools and
techniques of economic theory for effective and
efficient utilization of economic resources, in order
to optimize the profitability of a business
organization.
Introduction to Managerial Economics

7. • .
Nature of Managerial Economics
“Managerial Economics is the integration of
economic theory with business practice for the
purpose of facilitating decision making and
forward planning by the management.”
Spencer & Siegel man

8. Managerial Economics

9. Micro & Macro Economics
• Microeconomics focuses on the behaviour of the
individual actors on the economic stage i.e. firms
and individuals and their interaction to markets.
Managerial economics should be thought of as
applied microeconomics.
• Macroeconomics is the study of economic system
as a whole. It includes techniques for analyzing
changes in total output, total employment,
consumer price index, unemployment rate, exports
and imports. Macroeconomics addresses questions
about the effect of changes in investment,
government spending, tax policy on exports, output,
employment, prices

10. • Managerial Economics is basically micro-economic in
characteristics.
• Managerial Economics takes the help of macro-
economics to understand and adjust to the
environment in which firm operates.
• Managerial Economics follows normative school of
thought rather than positive school.
• Managerial Economics is prescriptive rather than
descriptive, in approach.
• It is both conceptual (qualitative) as well as metrical
(quantitative).
• The contents of Managerial Economics are based mainly
on the ‘theory of the firm’.
Characteristics of Managerial Economics

11. • Demand Analysis and Demand Forecasting
• Production Analysis
• Cost Analysis
• Pricing and Output
• Profit Management
Scope of Managerial Economics

12. Relationship of ME with other
disciplines
• Mathematics : Geometry , algebra, calculus ,
determinants , vectors.
• Operations Research: Linear Programming ,
Queuing
• Statistics : Theory of probability
• Traditional Economics :