Business Economics 24GEU62 Past Paper PDF

SRI KRISHNA ARTS AND SCIENCE COLLEGE COIMBATORE Business Economics 24GEU62 Ms. A.REVATHY Assistant Professor Department of Commerce CA &...

SRI KRISHNA ARTS AND SCIENCE COLLEGE COIMBATORE Business Economics 24GEU62 Ms. A.REVATHY Assistant Professor Department of Commerce CA & BA SKASC 1 Lecture 4: Economic Tools and Roles & Responsibilities of Managerial Economist Video Link: Click the Below Image/Link to Open https://drive.google.com/open?id=1MaziW9fVKkMJS5GZr8e188DqVCiXGsU_&authuser=0 SKASC 2 9 Course Learning Outcomes (write the statement of the course learning outcomes) CLO Statements Level of Teaching Method Mode of Assessments Taxonomy CLO 1 Assess the business economics C3- Apply Lecture/ Tutorial application for business decisions. CIA & ESE Capable to analysis the demand and forecasting. Demonstrate Production and Cost function. CLO 2 1.Explain the different types of business Case study method economic applications. A3 -Affective Case study Strategic Plan 2. Differentiate the types of demand curve. Assignments Business Models 3.Demonstrate Production and Cost function CLO 3 Classify different types of pricing under the C4-Analysis Lecture/ Tutorial various types of market structure. Show CIA & ESE the Marginal Productivity Theory and the factors of Production CLO 4 Distinguish between various types of A3 -Affective Case study Business Simulation market structure. Assignments/ Group Project report Study the factors of Production. Discussion SKASC 3  Mapping CLO’s with PLO’s (select the learning domain for each CLO’s and map it with PLO’s; for 10 example, CLO 1- Knowledge- PLO 1; CLO 2- Communication skills; PLO 5 etc.,) CLO PLO 1 PLO 2 PLO 3 PLO 4 PLO 5 PLO 6 PLO 7 PLO 8 PLO 9 PLO 10 PLO 11 CLO 1 √ CLO 2 √ CLO 3 √ CLO 4 √ 1 Transferable skills 1 Critical Thinking Skills 1 2 Entrepreneurial Skill 3 Lifelong Learning Skill SKASC 4 BASIC ECONOMIC TOOLS IN MANGERIAL ECONOMICS 1. Opportunity Cost Principle 2. Incremental Principle 3. Principle of Time Perspective 4. Discounting Principle 5. The Equi-Marginal Principle SKASC 5  1. Opportunity Cost Principle The opportunity costs are measured by the sacrifices in terms of goods and services involved in the decision. The opportunity cost of the funds employed in one’s own business is the amount of interest income which could be earned had that been employed in other ventures. The opportunity cost of using a machine to produce one product is measured as the income which could have been obtained by renting it out to somebody else. SKASC 6 1. Opportunity Cost Principle – Cont. If a machine has only one use, its opportunity cost is zero. In the same way, the opportunity cost of the time which an entrepreneur devotes to his business is the salary he could earn by working with some other firm of which he has knowledge. Thus, opportunity costs are the only relevant principle for decision making. SKASC 7 Opportunity Cost in Management A Production possibility C X curve C Y 1 X O D D1 B  2. Incremental Principle The economists make a use of the incremental principle in the theories of consumption, production pricing and distribution. In price-determination, this principle states that a firm would maximize its profits if it equates its marginal costs to its marginal revenue. In this way, this principle guides a business manager that he should expand his business in each direction only so long as the incremental benefit to his firm is more than the incremental costs. SKASC 9 2. Incremental Principle – Cont. The moment the incremental benefit (marginal revenue) is equated to the incremental cost (marginal cost); it is the point where the activity has to be limited. This principle focuses on the changes in prices, products, procedures, investments or whatever may be at stake in a business decision. Decision Rule, i.e. TCTR SKASC 10  3. Discounting Principle (DP) If a decision affects cost and revenue at future dates, it is necessary to discount those cost and revenue to present value before a valid comparison of alternative is possible. One of the fundamental ideas in Economics is that a rupee tomorrow is worth less than a rupee today. This could be understood using the formula, PV = FV/ (1+r) t FV = PV*(1+r) t Where, FV is the future value, PV is the present value, r is the discount (interest) rate, and t is the time between the future value and present value. SKASC 11  3. Discounting Principle (DP) – Cont. Suppose a person is offered a choice to make between a gift of Rs.100/- today or Rs.100/- next year. Naturally he will chose Rs.100/- today. This is true for two reasons- The future is uncertain and there may be uncertainty in getting Rs. 100/- if the present opportunity is not availed of Even if he is sure to receive the gift in future, today’s Rs.100/- can be invested so as to earn interest say as 8% so that one year after Rs.100/- will become 108 SKASC 12  4. Equi Marginal Principle (EMP) This deals with the allocation of resource among the alternative activities According to this principle, an input should be so allocated that the value added by the last unit is the same in all cases. Allocation of scarce resources on different alternative uses should be equally distributed. i.e.. MPa = MPb = MPc = MPd SKASC 13  4. Equi - Marginal Principle – Cont. Example Let us suppose that a firm has got two workers to employ in three activities, say production of bottled milk, butter, and cheese. The firm must allocate these workers in such a way that the marginal productivity of the last worker employed in each of these activities is the same. To put it in more clear way, if the marginal worker given the duty of producing bottled milk, adds output worth Rs. 20. Then the marginal worker employed on butter and cheese production must also earn neither more nor less than Rs. 20 for the milk plant. Otherwise the firm will not be making the best use of the employed labour. The Rs. 20 worth of additional output produced by the marginal worker is called ‘value -of marginal product or VMP.’ SKASC 14 5. Principle of Time Perspective A decision should take into account both the short run and the long run effects on revenues and costs and maintain a right balance between the long run and the short run perspectives. So each decision should be made in Short run basis as well as long run basis. According to short run decision the long run decision will get change. SKASC 15 ROLE OF A MANAGERIAL ECONOMIST Decision making process is to determine the key factors which influences the business over a period of time. Influenced by External and Internal factors External factors Constitute business environment Outside the control of management Internal factors Within the scope and operations of a firm Within the control of management SKASC 16 ROLE OF A MANAGERIAL ECONOMIST – Cont. Managerial economics, aims at developing a managerial theory of the firm with the help of economic theory of the firm. There are certain difficulties in using economic theory as an aid to the study of decision-making at the level of the firm. This is because it fails to provide sufficient analytical tools that are useful to managers. SKASC 17 MAJOR ROLES 1. Business Operations 2. Environmental Studies 3. Specific Functions 4. Economic Intelligence 5. Participating in Public Debates 6. In Indian Context SKASC 18 1. Business Operations Sales and profit budget for next year Production schedule and inventory policies Changes in Wage and price policies Cash and capital management SKASC 19 2. Environmental Studies Population shift Changes in social behavior and fashion Market and customer opportunities Outlook for National Economy International market SKASC 20 3. Specific Functions – Sales Forecasting – Production programs – Industrial market research – Investment analysis and forecasts – Economic analysis of competing – Advice on trade and public relations companies – Advice on foreign exchange – Pricing problems of industry – Environmental forecasting – Capital projects – Analysis of underdeveloped economies SKASC 21 4. Economic Intelligence General economic information like competitors prices and products, tax rates, tariff, etc Someone who can understand them better and provide intelligent service supply 5. Participating in Public debates Government and society seek the advice and views of economists SKASC 22 6. Indian Context Macro forecasting Production planning at micro and macro levels Economies of various product lines Assistance in preparing overall development plans Preparation of periodic economic reports Well informed on economic/industrial developments at national and international levels SKASC 23  Responsibilities of Managerial Economist Should always focus on the main objective of the management Making best possible forecast which minimizes risks involved in uncertainties Alert management at the earliest possible in case of any error in his forecast Must establish and maintain many contacts and data sources. Join in professional associations and take active part in them. Must be able to express himself clearly and simply Try to minimize technical terminology while communicating with the management executives. SKASC 24  Animation Video :Click the Below Image/Link to Open https://drive.google.com/open?id=1BUpwoF https://drive.google.com/open?id=1gf-Xoib noowaEgFKMjfMYPYPhRoKVWPhU&auth 0wJC3V0ziX667R3I-1GyL7Z&authuser=0 user=0 https://drive.google.com/open?id=1uT6SZN https://drive.google.com/open?id=158i6ff-Zi MUiZj7tP0Eh11udpO5URdWw3jP&authuse 8zB2ITgpdnJVC72amSemW_V&authuser= r=0 SKASC 0 25  Click the Below Image/Link to Open Do it Yourself : https://forms.gle/syhuwpj7XuMy7LDr6 eBook: https://drive.google.com/open?id=1BLnJynhy24 Fu9p5q_6FKH79VJEXYA0NQ&authuser=0 SKASC 26