Managerial Economics

Managerial Economics generally refers to the integration of economic theory with business practice. It deals with the use of economic concepts and principles of business decision making. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analyzing business problems for rational business decisions. Managerial economics can be viewed by most modern economists as a practical application of economics theory in using effectively the firms scarce resources.

Classical Economics

Beginning with the ideas of Adam Smith (An Inquiry into the Nature and Causes of the Wealth of Nations, 1750), including the ideas of David Ricardo, and ending approximately with John Stuart Mill (1850’s) the framework was established for classical economics.

Mill in particular established the foundation for free trade in advocating individual libertarian autonomy rights which had the effect of limiting legislative authority in matters effecting the private economy.   In the context of 19th Century Europe, this argument makes much sense, monopolies had been granted to crown corporations for most major state projects and independent private business moguls were working toward respectability.… Read the rest

Abey Francis

Theory of Absolute Advantage and Comparative Advantage

Theory of Absolute Advantage  

If one region can produce a commodity with less expense than another, and they exchange, then both should benefit. In a nutshell, this is the law of comparative advantage. It is used as the justification for WTO trade regulations.

Some land grows corn better than other land. This economical insight into farming in early 18th Century was the cornerstone of the law of absolute advantage. Some farmland will yield more corn per acre than another, therefore the good land confers an absolute advantage over other regions. The conclusion drawn from this argument is that the farmer of the poor land should change products that it can produce to its absolute advantage, such as grazing sheep.… Read the rest

Abey Francis

Time Series Analysis for Business Forecasting

Forecasting is a method or a technique for estimating future aspects of a business or the operation. It is a method for translating past data or experience into estimates of the future. It is a tool, which helps management in its attempts to cope with the uncertainty of the future. Forecasts are important for short-term and long-term decisions. Businesses may use forecast in several areas: technological forecast, economic forecast, demand forecast. There two broad categories of forecasting techniques: quantitative methods (objective approach) and qualitative methods (subjective approach). Quantitative forecasting methods are based on analysis of historical data and assume that past patterns in data can be used to forecast future data points.… Read the rest

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Commodity Price Stabilization in International Business

Many developing nations exports are concentrated in only one or a few primary products and thus unstable export markets, worsening terms of trade, and limited access to world markets for the products can significantly reduce export revenues and seriously disrupt domestic income and employment level. In addition, many developing nations feel that developed nations tend to insist that developing nations open their markets to industrial products from the developed world, yet refuse to open their markets to agricultural goods from the developing world. For example, United States have used aggressive antidumping and countervailing duties to limit access to their markets.

As noted, the export prices and revenues of developing countries can be quite volatile.… Read the rest

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Interest Rate as an Effective Tool for Regulating the Economy

Reserve Bank of India (RBI), the Central Bank in India, operates its monetary policies primarily by the set of interest rate. Therefore, interest rate policy plays an important role than ever before in economy. It is used as an effective tool for regulating the economy, dominating inflation and controlling investment and savings. In general, the Central Bank often changes the level or construction of the interest rate to achieve these goals.

The increase or decrease of interest rate causes the capital of enterprises go up or down respectively, which determines the expansion or narrowing of production. Therefore, it changes the number of jobs available.… Read the rest

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Interest Rate Concepts

In market economy, there are many economic-financial categories, including credit and credit interest rate which are two of the most important ones.

Credit activities are borrowing and lending activities. The capital-using relationship between  borrowers and lenders bases on the principles of reimbursement.  Lenders who are in excess of capital have opportunities not only to preserve but also capital get profit.  Borrowers who are short of capital have chances to get additional capital to meet production, business or living needs. Therefore,  owing to the credit activities that a large proportion of capital in the economy are mobilized,  concentrated and distributed from temporary capital surplus sections to shortage ones to meet  different needs of all entities in the economy.… Read the rest

Abey Francis