MANAGERIAL ECONOMICS
Unit-I
1. Economics: - Economics is a, Science which studies human behavior as a relationship
between ends and scare means which have alternative uses.
(Source: Managerial Economics by HL Ahuja, p.no. 3)
2. Microeconomics:-It may be defined as that branch of economic analysis which studies the
economic behavior of the individual unit, may be a person, a particular household, or a
particular firm. It is study of one particular unit rather than all the units combined together.
(Source: Macro Economics by ML Seth, page no. 1)
3. Macroeconomics:-It may be defined as that branch of economic analysis which studies the
behavior of not one particular unit, but of all the units combined together.
(Source: Macro Economics by ML Seth, page no.3)
4. Managerial Economics: - Managerial Economics deals with the use of economic concepts
and principles for business decision making. It was also known as “Business Economics”.
5. Economic Laws: - “Economic Laws or statements of economic tendencies, are those social
laws, which relates to branches of conduct in which the strength of the motives chiefly
concerned can be measured by money price.” (Source: Managerial Economics by K K
Dewett, p.no.21
6. Economic Theory:- The study of microeconomics and macroeconomics.
7. Scarcity--A physical or economic condition where the quantity desired of a good or
service exceeds the availability of that good or service in the absence of a rationing
Unit-II
1. Utility:- It means the satisfaction which an individual derives from consuming a commodity.
(Source: Managerial Economics by HL Ahuja, p.no. 82)
2. Demand.:-It is consumer’s desire to have goods or services for which he is willing
and able to pay.(Source: Managerial Economics by HL Ahuja, p.no. 81)
3. demand function:-The demand function for a commodity describes as the relationship
between the quantity demanded of it and the factors that influence it. (Source: Managerial
Economics by HL Ahuja, p.no. 83)
4. Law of Demand.:- Other things being equal, “ if the price of a commodity falls, the quantity
demanded of it will rise and if the price of a commodity rises, its quantity demanded will rise.”
(Source: Managerial Economics by HL Ahuja, p.no. 84-85)
5. Bandwagon effect. :-Bandwagon effect arises because individuals demand some
commodities because others are doing so, that is those commodities happens to be in fashion.
(Source: Managerial Economics by HL Ahuja, p.no. 91)
6. Snob effect:-It refers to the desire to purchase a commodity having prestige value so
as to look different or exclusive than others.(Source: Managerial Economics by HL
Ahuja, p.no. 91 )
7. Derived Demand:-There are certain goods which are not demanded by individuals to satisfy
their wants directly but for using them to produce other consumer goods which directly satisfy
their wants. Demand for them is called as derived demand. (Source: Managerial Economics
by HL Ahuja, p.no. 96)
8. Giffen goods:- An inferior good for which the positive substation effect is smaller
than the negative income effect so that less goods is purchased when its price falls.
9. Seasonal variation:- The regularly recurring fluctuation in economic activity during
each year because of weather and social customs
10. Substitute Goods--A pair of goods where the quantity demanded of one increases
when the price of a related good also increases.
11. Complementary goods:- Complementary goods are those which, are jointly
demanded to satisfy a particular demand
12. Elasticity of Demand.:-It referrers to the degree of responsiveness of quantity demanded of
a good to a change in its price, consumers’ income and prices of related goods.(Source:
Managerial Economics by HL Ahuja, p.no. 98)
13. Price Elasticity:-It referrers to the degree of responsiveness of quantity demanded of a good
to a change in its price.(Source: Managerial Economics by HL Ahuja, p.no. 98)
14. Income Elasticity :- It referrers to the sensitiveness of quantity demanded to a change in
consumer’s income.(Source: Managerial Economics by HL Ahuja, p.no. 98)
15. Cross Elasticity:- It referrers to responsiveness of quantity demanded of a good to a change
in the price of a related goods, which may be either a substitute for it or a complementary with
it.(Source: Managerial Economics by HL Ahuja, p.no. 98)
16. Elastic Demand:- If a small change in price may lead to a great change in demand, then we
will call it as elastic demand.(Source: Managerial Economics by KK Dewett p.no. 110)
17. Inelastic Demand:-Even a big change in price is followed only by a small change in
demand, it is called as inelastic demand.(Source: Managerial Economics by KK Dewett
p.no. 110)
18. Law of Supply:- Other things remaining the same, as the price of commodity rises its
supply is extended, and as the price falls its supply is contracted.(Source: Managerial
Economics by KK Dewett p.no. 223)
19. Elastic Supply:-When a small fall in price leads to great contraction in supply, the
supply is comparatively elastic. (Source: Managerial Economics by KK Dewett p.no.
224)
20. Inelastic Supply:- A big fall in price leads to a very small contraction in supply, the
supply is said to be completely inelastic.(Source: Managerial Economics by KK Dewett
p.no. 224)
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