Managerial Economics

(Content: Prof. Vishwa Ballabh)
The root cause of all economic problems are:

1. Wants/ desires are unlimited
2. Resources are limited
3. We can prioritize wants
4. Resources have alter native uses

Hence, economics is also called science of choice. Organizations to choose how to allocate limited resources in their competing uses so as to maximize it goals.
Microeconomics is the study and analysis of the behavior of individual segments of the economy where as Managerial economics provides a systematic, logical way of analyzing business decision

There is a circular flow of goods and money in the economy between firms and households via markets.

The Economic System of every society must answer the following key questions:

1. What to produce?
2. How to produce?
3. How to distribute?

Historically there were three types of economic systems:

1. Command & Control
2. Market economy
3. Mixed economy

'Price' is the key factor that acts as a signal to the producers and consumers. Due to the inherent nature that producers and consumers will always act so as to maximize their self interest, decentralized decisions are taken and this produces maximum good to maximum people.