ECONOMICS VS. MANAGERIAL ECONOMICS
ECONOMICS – is a science that deals with
the activities of man in obtaining wealth for the
satisfaction of human wants
 From the Latin word “oikonomous”
where oiko means house/household and
nomous means management.
 Economics is a household management
ELEMENTS OF ECONOMIC ACTIVITIES
1) Human wants – insatiable desire of
things, goods, and services.
2) Resources – things that are used to
produce goods
3) Technology – technique of production
ECONOMIC SYSTEM MODEL
i.
Father of Economics: Adam Smith
WHY STUDY ECONOMICS?
 To study society
 Social Sciences:
 Studies human behaviour
and interrelated discipline
 To study global affairs
 Economics:
 Studies human life
ECONOMIC ACTIVITIES
 Is an interaction among economic units
involved in:
o Production
o Distribution
o Consumption
o Exchange of goods and services
Goods – Anything that satisfy human wants
Services – Labor or work of expertise.
Capitalism – factors of production and
distribution is owned and managed by
private individuals. Referred as, “Market
Economy”
FACTORS OF PRODUCTION
1)
2)
3)
4)
Land –
Labor –
Capital –
Entrepreneurship –
CHARACTERISTICS OF CAPITALISM
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ii.
iii.
Private property
Economic freedom
Free competition
Profit motive
Communism – Command Economy
Socialism – Mixed Economy
o Major strategic industries owned
by state/government
o Minor industries owned by
private individual/ sectors
Managerial Economics
 Integration of economic theory with
business practice for the purpose of
facilitating decision-making and forward
planning by management.
 Study of application of managerial skills
in economics. It helps in anticipating,
determining and resolving in problems.
These problems may pertain to cost,
prices or forecasting future market.
 It is a science dealing with effective use of
scarce resources. It guides the managers in
taking decisions relating to the firm’s
customers, competitors, suppliers as well as
relating to the internal functioning of firms.
Managerial Decisions
 Applications of analytical tools
(mathematical and statistical).
 Application of Economic concept, theories.
DIFFERENCE
ECONOMICS
MANAGERIAL ECONOMICS
Meaning
Framing economic principle to solve
economic problems
Application of economic principles in
solving economic problems
Character
Microeconomic and macroeconomic
Microeconomic
Main Task
Fulfilment of the needs of
individuals and entity
Proper decision making
Nature
Positive and normative
Normative
Scope
Wider
Narrow
Managerial Economics
Applied branch of Economics
Concerned with
Theories from production,
consumption and distribution
Profit theory
Analysis Involved
Macro-level: growth, inflation and
employment
Micro-level: demand, supply and
profit
Economic aspects
Economic and non-economic
Based on certain assumptions
Some assumptions become invalid
when applied
Branches
Concentration
Validity of
Assumption
ROLE OF MANAGERIAL ECONOMICS
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Studies business environment
Production Scheduling
Control Cost
Set Prices
Bring coordination
Investment Analysis
Factor of productions:

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Capital
Resources
Land
Physiological needs:

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Food
Clothing
Shelter
Barter

Exchange of goods and services
without using money