Page 20 - DECO405_MANAGERIAL_ECONOMICS

Unit 1: Introduction to Managerial Economics

Further decisions that the company may consider are: Notes
1. More focus on industrial paints, especially the automotive paints division
2. Manage the chemicals business more efficiently
3. Better marketing strategies to adopt top line growth in international operations

4. Reduce the input costs of production
5. Consolidate on the ‘colourworld’ and ‘home solutions’ initiatives to consolidate the
leadership position in decorative paints segment.

Question
How does economics play a role in decision-making at Asian Paints?
Ans. Analysis of economic variables allows the firm to make optimal business decisions.
The concepts of economics like demand, supply, production, costs and macro economic
variables that affect the entire economy play a vital role in decision-making.
Source: Atmanand, Managerial Economics, 2nd Edition, Excel Books, New Delhi.

1.7 Summary

Managerial Economics combines economic theory with managerial practice.

The subject offers powerful tools and techniques for managerial policy-making.
A close interrelationship between management and economics has led to the development
of managerial economics.
Managerial economics, may be taken as economics applied to "problems of choice" or
alternatives and allocation of scarce resources by the firms.
Managerial economics covers the four groups of problem essential in both decision making
and forward planning: Resource allocation, Inventory and queuing problem, Pricing
problems and Investment problems.
A firm applies principles of economics to answer these questions: What to produce and
how much to produce? How to produce? For whom to produce?
Every economy faces some problems. These problems are associated with growth, business
cycles, unemployment and inflation.

A recession is defined as a period of two or more successive quarters of decreasing
production.
Unemployment occurs when a person is available to work and currently seeking work,
but the person is without work.
A rising price level means inflation. It has many disadvantages: uncertainty, discourage
productive activity, inefficient use of resources etc.
Stagnation is a serious problem and a cause of other problems in an economy.

1.8 Keywords

Inflation: It is a rise in the general level of prices of goods and services in an economy over a
period of time.
Macroeconomics: It is study to economy as whole.

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