Economics

• science of decision-making
• A study of human behaviour in ordinary business of life (Alfred Marshall)
• A study of allocating scarce resources to satisfy individual wants or desires.
• A framework to study societal and business problems
• An applied course in constraint optimisation (limited resources and unlimited desires)

Managerial Economics

• Manager: A person who directs resources to achieve a stated goal.
• Managerial Economics:
  • The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
  • Application of economics to business problems
• Economics:
  • Microeconomics (study of individual decision makers)
    • Producers → Firms → Managers
    • Consumers
    • Markets
  • Macroeconomics (study of aggregate economic phenomenon)
  • Econometrics (measuring microeconomics and macroeconomics phenomenon)

<aside> 💡 Managerial Economics is a subset of Microeconomics and Industrial Organisation

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Economic Models

Types of Variables

• Exogenous variables are those whose values are determined outside the model and are taken as given. They are not affected by other variables in the model.
• Endogenous variables are those whose values are determined within the model itself. They are affected by other variables in the model.

Mathematics and Statistics

• Optimization
  • Managers
    • Minimise loss
    • Maximise profit
  • Consumer
    • Maximise utility/satisfaction
• Equilibrium
  • Satisfaction of different optimising agents
• Comparative Statistics
  • Comparing two equilibriums