Economics Basics

Types of Demand

Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. generally resulting in  market equilibrium  where  products  demanded at a price are equaled by products supplied at that price.

Demand depends on the  price  of the commodity and refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship.

Read: Concept of Demand in Managerial Economics

The different types of demand are;

i) Direct and Derived Demands

Direct demand refers to demand for goods meant for final consumption; it is the demand for consumers’ goods like food items, readymade garments and houses.… Read the rest

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Concept of Demand in Managerial Economics

In Economics, use of the word ‘demand’ is made to show the relationship between the prices of a commodity and the amounts of the commodity which consumers want to purchase at those price.

Definition of Demand:

Hibdon defines, “Demand means the various quantities of goods that would be purchased per time period at different prices in a given market.”

Bober defines, “By demand we mean the various quantities of given commodity or service which consumers would buy in one market in a given period of time at various prices, or at various incomes, or at various prices of related goods.”

Demand for product implies:

a) desires to acquire it,

b) willingness to pay for it, and

c) Ability to pay for it.… Read the rest

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The Micro Economics and Macro Economics

Economic analysis is of two types (a) Micro economic analysis and (b) Macro economic analysis

a) Definition of Micro economics:

According to E. Boulding, “Micro economics is the study of particular firm, particular household, individual price, wage, income, industry, and particular commodity.”

In the words of Leftwitch, “Micro economics is concerned with the economic activities of such economic units as consumers, resource owners and business firms.”

  • ‘Micro’ is a Greek word means ‘small’.
  • Micro economic theory studies the behaviour of individual decision-making units such as consumers’ resource owners, business firms, individual households, wages of workers, etc.
  • It studies the flow of economic resources or factors of production from the resource owners to business firms and the flow of goods and services from the business firms to households.
… Read the rest
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Basic Economic Tools in Managerial Economics for Decision Making

Business decision making is essentially a process of selecting the best out of alternative opportunities open to the firm. The steps below put managers analytical ability to test and determine the appropriateness and validity of decisions in the modern business world. Following are the various steps in decision making process:

  1. Establish objectives
  2. Specify the decision problem
  3. Identify the alternatives
  4. Evaluate alternatives
  5. Select the best alternatives
  6. Implement the decision
  7. Monitor the performance

Modern business conditions are changing so fast and becoming so competitive and complex that personal business sense, intuition and experience alone are not sufficient to make appropriate business decisions. It is in this area of decision making that economic theories and tools of economic analysis contribute a great deal.… Read the rest

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Introduction to Managerial Economics

Managerial economics is a discipline which deals with the application of economic theory to business management. It deals with the use of economic concepts and principles of business decision making. Formerly it was known as “Business Economics” but the term has now been discarded in favor of Managerial Economics.

Managerial Economics may be defined as the study of economic theories, logic and methodology which are generally applied to seek solution to the practical problems of business. 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.… Read the rest

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Approaches to Demand Forecasting in Managerial Economics

All firms forecast demand, but it would be difficult to find any two firms that forecast demand in exactly the same way. Over the last few decades, many different forecasting techniques have been developed in a number of different application areas, including engineering and economics. Many such procedures have been applied to the practical problem of forecasting demand in a business  system, with varying degrees of success. Most commercial software packages that support demand forecasting in a business  system include dozens of different forecasting algorithms that the analyst can use to generate alternative demand forecasts.

While scores of different forecasting techniques exist, almost any forecasting procedure can be broadly classified into one of the following four basic categories based on the fundamental approach towards the forecasting problem that is employed by the technique.… Read the rest

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