of the front cover. New Topics. At one time, managerial economics books most closely resembled intermedi- ate microeconomics texts with topics reworked here . Available in PDF, ePub and Kindle. Managerial Economics or Business Economics subject is covered in simple explanation by this book and requires special. This textbook covers all the main aspects of managerial economics: the . As managerial economics has increased in importance, so books on.
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organizations do. This book presents economic concepts and principles from the perspective of “managerial economics,” which is a subfield of economics that. PDF | Managerial Economics: Concepts and Tools is intended as a textbook for Managerial Economics courses in Business and Management. This book is printed on acid-free paper. International Standard Book Number: 0 Descriptive Versus Prescriptive Managerial Economics 8.
Indian Accounting Standar It connotes both explicit and implicit money expenditure and include fixed and variable costs. Implicit cost A small change in the demand for consumer goods Given his income and the market prices of the various commodities. These methods are used to forecast demand in the long term.
The demand for nondurable goods depends largely on their prices. Perishable non-durable goods are defined as those which can be used only once. Replacement of old products and expansion of existing stock. On the other hand if the demand for a product is tied to the demand for some parent product. Commodities like tea and vegetables do come on absolute terms.
Producer's goods on the other hand are used for the production of consumer goods or they are intermediate goods. The demand for durable goods changes over a relatively longer period. Durable goods may be consumer goods as well as producer goods. It may also be possible that this demand may be accelerated or accentuated in the same proportion as the change in the demand for the final consumer goods.
These structures can be differentiated the basis of product differentiation and number of sellers. A Clear understanding of the relation between company and industry demand necessitates the understanding of different market structures.
A typical demand function can be specified as follows: The linear demand curve may be written in the form of.. A demand curve is said to be linear when its slope is constant all along the curve. The most important types of elasticity are: This is called Change in Quantity Demanded. On the other hand Shift in the demand curve either upward or downward is in response to a change in one of the other determinants of demand.
The point elasticity of demand is defined as the proportionate change in the quantity demanded resulting from a very small proportionate change in price. For very small changes in price point elasticity of demand is used as a measure of responsiveness of demand and arc elasticity of demand is the suitable measure for comparatively large changes in price. The income elasticity is positive for normal goods.
The sign of cross elasticity is negative if x and y are complementary goods and positive if x and y are substitutes. The higher the value of the cross elasticity the stronger will be the degree of substitutability or complementarity of x and y.
It suffices for the consumer to be able to rank the various baskets of goods according to the satisfaction derived. This is the axiom of utility maximization. Given his income and the market prices of the various commodities. The main ordinal theory is known as the indifference-curve theory is based on certain assumptions. Under these conditions the consumer is in equilibrium when the marginal utility of x is equated to its market price. There are two basic approaches to compare the utilities.
Under certainty i. There are certain assumptions of cardinal utility theory. Two conditions must be fulfilled for the consumer to be in equilibrium. This condition is fulfilled by the axiom of diminishing marginal rate of substitution of x for y and vice versa.
It is also called alternative cost. The explicit and implicit costs together make the economic cost. A sunk cost is an expenditure that has been made and cannot be recovered since it accord to the prior commitment.
On the other hand actual Cost considers only explicit cost.
Incremental cost is the change in cost tied to a managerial decision associated with expansion of output or addition of new variety of product. Opportunity cost is an important example of implicit cost. The cost of production is an important factor in almost all the business analysis and decisions. The cost concepts can be grouped under two categories on the basis of their nature and purpose.
In contrast implicit costs are non-cash expenses. The concept of economic rent or economic profit is associated with it. Average and Marginal Costs Total Cost Total cost is the total expenditure incurred on the production. It connotes both explicit and implicit money expenditure and include fixed and variable costs.
Variable costs are those which vary with the variation in the total output. Fixed costs are associated with the short run. It include cost of raw material. The fixed costs include the cost of managerial and administrative staff.
It does not vary with variation in the output for a certain scale. Average cost Average cost is obtained by dividing the total cost by the total output. Average cost curves Marginal Cost Marginal cost is the change in the total cost for producing an extra unit of output.
Demand forecast is a must for a firm operating its business as today's market is competitive. Long run forecasts are helpful in proper capital planning. The purpose of the two however differs. Long run forecasting is used for new unit planning.
It helps in saving the wastages in material. Different set of variables is used in long run forecasts than in short term forecasts. In short run forecasting. It is used to decide the way the firm should plan for future in relation to the industry.
It is done for decision like diversification. It is done to ascertain the validity of trend. It is measured with the help of indices like wholesale price index. Questionnaires do not provide the freedom to ask follow-up questions to explore the answers of the respondents. No verifiable data is used and it is based on human judgment and the system of ratings to produce a result.
Qualitative forecasts include: Survey techniques and Opinion Pools. In this section. Between the two broad types of surveys. The estimates are made with a system of ratings to produce a figure.
The usual questions found in questionnaires are closed-ended questions. For instance. Therefore a final ratification has to be done by the head office. A special case in this method is the Delphi Technique. In this method. When the researcher attempts to gather information over a period of time or from one point in time up to another.
Collecting information from the respondents at a single period in time uses the cross-sectional type of survey. Crosssectional surveys usually utilize questionnaires to ask about a particular topic at one point in time. This method has advantage that it is based on firsthand knowledge of sales people and also it is cheap and easy.
Sales force opinion method: In this method people who are closest to the market are asked for their opinion on future demand. In this method opinion of experts in the related field is solicited and the final forecast based on their opinion. The aim of longitudinal surveys is to collect data and examine the changes in the data gathered.
Then opinions of different people are compiled to get overall demand forecast. However the opinion of the concerned people could be biased or twisted for their own benefit. Opinion poll methods include: In this method the consumers are contacted personally to disclose their future purchase plans. This method uses statistical formulae to These methods are used to forecast demand in the long term.
Then the mean of the upper and lower values is computed to reach a point estimate.
It could be linear. If the opinion is matching then the opinion is accepted otherwise the experts are asked to sit together and arrive at a narrow range. This method involves the plotting of the data on the graph and estimating where the trend line lies. This process is continued till a sufficient range is reached. On the other hand. Trend projection method can be used when there is some sort of correlation between the two variables. Unlike survey methods. Statistical forecast methods include: Thus the experts giving a very high or a very low value are concerned and the group argues until it comes up with a narrow range of value.
The line can be extrapolated and the forecast read from the graph. In this estimation. This is one of the most frequently used forecasting methods. Its assumption is that the time series will continue to move as in the past. These indicators are time series that tend to precede changes in the level of economic activity.
The trend line is the estimating equation. This is an extension of linear regression which attempts to build seasonal and cyclical variations into the estimating equation. These are indicators which break the movements in economic activity or business cycle.
It refers to the values of variable arranged chronologically by days. The first step in time series analysis is usually to plot past values of the variable that we seek to forecast on vertical axis and the time on the horizontal axis in order to visually inspect the movement of the time series over time.
Thirdly the time lag between the indicator and forecast could be so small that it could become useless. This method assumes that past data can be used to predict future sales. The major problem is not choosing the technique but choosing the relevant indicator for the product in question.
There are only three types of indicators: These indicators tend normally to anticipate turning points in a business cycle. These are indicators which move in step or coincide with movement in general economic activity or business cycle. Secondly even if the relevant indicator is found out the changes in factors may render the indicator redundant over time. Enter here no purchase necessary. Join Now Login.
Click to Preview. Srinivas R. Rao Downloads: Book Description HTML Managerial Economics or Business Economics subject is covered in simple explanation by this book and requires special attention as it is a basic and fundamental subject for the entire understanding of Business Management and Financial subjects.
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