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1
Q

What is the definition of Managerial Economics according to Spencer and Siegelman?

A

The integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.

This definition emphasizes the practical application of economic theories in managerial contexts.

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2
Q

What are the characteristics of Managerial Economics?

A
  • Close to Micro-Economics
  • Macro touch
  • Prescriptive rather than descriptive
  • Pragmatic
  • Applied in Nature
  • Offers scope to evaluate each alternative
  • Interdisciplinary
  • Assimilations and limitations

These characteristics highlight the practical and interdisciplinary nature of Managerial Economics.

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3
Q

List the functions included in the scope of Managerial Economics.

A
  • Demand Analysis and Forecasting
  • Cost and Production Analysis
  • Pricing Decisions, Policies and Practices
  • Profit Management
  • Capital Management

These functions are essential for effective managerial decision-making.

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4
Q

True or False: Managerial Economics is only concerned with macroeconomic factors.

A

False

Managerial Economics is primarily focused on microeconomic factors, although it also incorporates macroeconomic insights.

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5
Q

What is the significance of demand analysis in Managerial Economics?

A

It serves as a guide for management in preparing production schedules and employing resources.

Accurate demand forecasts help businesses maintain market position and profitability.

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6
Q

Fill in the blank: Managerial Economics is both a _______ and an art.

A

science

This dual nature allows for both analytical and creative approaches in decision-making.

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7
Q

What are the major areas covered under pricing decisions in Managerial Economics?

A
  • Price determination in various market forms
  • Pricing methods
  • Differential pricing
  • Product-line pricing
  • Price forecasting

Effective pricing strategies are crucial for revenue generation.

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8
Q

What does profit management involve in the context of Managerial Economics?

A

Estimating costs and revenues at different output levels and planning for profit maximization.

It is essential for assessing the success of a firm.

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9
Q

What are the components of capital management in Managerial Economics?

A
  • Cost of capital
  • Rate of return
  • Selection of projects

Capital management is critical for long-term investment planning.

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10
Q

How does Managerial Economics relate to Financial Accounting?

A

It relies on accounting data for decision-making and business analysis.

Financial statements provide insights into a firm’s operational performance.

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11
Q

What mathematical techniques are commonly used in Managerial Economics?

A
  • Geometry
  • Algebra
  • Calculus
  • Linear programming
  • Inventory models
  • Game theory

These techniques assist in optimizing business decisions.

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12
Q

What is the Law of Demand?

A

There is an inverse relationship between quantity demanded and its price.

This fundamental economic principle illustrates how price changes affect consumer behavior.

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13
Q

What three conditions must be satisfied for a product to have demand?

A
  • Desire to buy
  • Willingness to pay
  • Ability to pay

These conditions are essential for establishing market demand.

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14
Q

What is the market demand function expressed mathematically?

A

Dx = f (P, Pr, I, Ei, M, T, A, U)

This function encompasses various factors influencing demand.

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15
Q

What role does statistical analysis play in Managerial Economics?

A

It helps in estimating demand and analyzing variables that affect business decisions.

Statistical tools are essential for making informed decisions based on data.

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16
Q

What is the purpose of using Operations Research in Managerial Economics?

A

To tackle complex management problems and optimize decision-making.

Operations Research techniques enhance efficiency in various business functions.

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17
Q

What is a significant challenge in capital management?

A

Planning and control of capital expenditure due to its complexity and resource intensity.

Effective capital management is crucial for long-term financial stability.

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18
Q

What does the term ‘functional relationship’ in demand refer to?

A

The whole range of price quantity relationship, not just the quantity demanded at a given price per unit of time.

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19
Q

What is the law of demand?

A

There is an inverse relationship between quantity demanded and its price.

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20
Q

According to Alfred Marshall, how does the amount demanded change with price?

A

The amount demanded increases with a fall in price and diminishes with a rise in price.

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21
Q

What is a demand schedule?

A

A list of quantities of a commodity purchased by a consumer at different prices.

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22
Q

What happens to demand when price decreases?

A

There is an increase in demand for goods.

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23
Q

What is the shape of the market demand curve?

A

It slopes from left down to the right.

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24
Q

List the assumptions of the law of demand.

A
  • No change in income of consumers
  • No change in the price of the product
  • No change in quality of product
  • No substitute for the commodity
  • Prices of related commodities remain the same
  • No change in customs
  • No change in taste and preference of consumers
  • Size of population remains the same
  • Climate and weather conditions are the same
  • Tax rates and other fiscal measures remain the same.
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25
What is an exceptional demand curve?
A demand curve that slopes from left to right upward due to reasons like fear of shortages.
26
What are Giffen Goods?
Special varieties of inferior goods where demand increases as the price rises, contrary to the law of demand.
27
What is conspicuous consumption or Veblen effect?
A phenomenon where the demand for luxury goods increases with price due to their prestige value.
28
What are conspicuous necessities?
Essential items whose demand remains high despite price increases due to their status symbol.
29
How does ignorance affect consumer demand?
Consumers may purchase more of a commodity at a higher price believing it is of better quality.
30
What happens to consumer behavior during emergencies?
Households make increased purchases even at higher prices due to fear of shortages.
31
What is price elasticity of demand?
The responsiveness of quantity demanded due to changes in price.
32
How is price elasticity of demand calculated?
By dividing the percentage change in quantity demanded by the percentage change in price.
33
What does a perfectly elastic demand imply?
A small change in price causes a major change in demand.
34
What is perfectly inelastic demand?
No change in demand occurs with a change in price.
35
Define relatively elastic demand.
Demand where the proportionate change in demand is greater than the proportionate change in price.
36
Define relatively inelastic demand.
Demand where the percentage change in demand is less than the percentage change in price.
37
What is unitary elastic demand?
When the proportionate change in demand equals the change in price.
38
What is the point elasticity method?
A method to measure elasticity of demand at a particular point on a demand curve.
39
What is arc elasticity method?
A method that measures average elasticity over an arc of a demand curve.
40
What is the formula for cross elasticity of demand?
% change in demand for commodity A / % change in price of commodity B.
41
What does advertising or promotional elasticity of demand measure?
The expected changes in demand as a result of changes in promotional expenses.
42
What is the formula for point elasticity?
∆Q / ∆P
43
What is the relationship between elasticity of demand and the base used for calculation?
Elasticity of demand varies depending on the base
44
What is the arc price elasticity of demand?
Measurement of elasticity between two points on the demand curve
45
What happens to the estimation of elasticity as the price change becomes smaller?
The arc of the demand curve may vanish or converge to a point
46
How is the price determination of factors of production influenced by elasticity?
Factors are paid based on their elasticity of demand
47
If the demand for a factor is inelastic, what will happen to its price?
Its price will be high
48
What is the importance of elasticity of demand in government policies?
Helps in determining tax policy, rising bank deposits, public utility, and currency valuation
49
What is demand forecasting?
An estimate of future demand for a product
50
According to Evan J. Douglas, how is demand estimation (forecasting) defined?
A process of finding values for demand in future time periods
51
What are the three kinds of opinion polling methods for demand forecasting?
* Consumer's Survey Method * Complete Enumeration Survey * Sample Survey
52
What is the limitation of the Complete Enumeration Survey method?
Requires significant resources, manpower, and time
53
What is the Sample Survey technique based on?
The assumption that the sample represents the population
54
What is test marketing?
Involves placing a product with users for reactions to estimate likely demand
55
What does the End Use Method involve?
Projects the sale of an intermediate product based on the demand for the final product
56
What is the Sales Force Opinion Method also known as?
Collective opinion method or grass roots approach
57
What is the Delphi Technique?
A method requiring a panel of experts to forecast through questionnaires
58
What are the important statistical methods for demand forecasting?
* Trend Projection Method * Barometric Technique * Regression Analysis * Econometric Models
59
What is the purpose of the Trend Projection Method?
To analyze past sales data arranged chronologically
60
What are the four types of components in time series?
* Secular Trend * Secular Variation * Cyclical Element * Irregular or Random Variation
61
What does the Barometric Technique rely on?
Predicting future changes based on current economic indicators
62
What are the three series correlated in the Barometric Technique?
* Leading Series * Coincident or Concurrent Series * Lagging Series
63
What does regression analysis attempt to assess?
The relationship between at least two variables
64
What factors influence demand forecasting?
* Types of Goods * Competition Level * Price of Goods * Level of Technology * Economic Viewpoint
65
What distinguishes established goods from new goods in forecasting?
Information is more available for established goods
66
What challenges does a highly competitive market pose for demand forecasting?
Increased difficulty due to the number of competitors and risk of new entrants
67
What impact does rapid technological change have on demand forecasting?
Existing products may become obsolete
68
Who is considered the father of economics?
Adam Smith
69
What is managerial economics also referred to as?
Business economics
70
What does the law of demand state?
The relationship between price and quantity demanded
71
What are Giffen goods also known as?
Inferior goods
72
What is the typical period for short term demand forecasts?
Less than one year
73
Managerial economics is also called?
business economics ## Footnote Other terms include macroeconomics and industry economics.
74
What states the relationship between price and quantity demanded?
law of demand ## Footnote This is a fundamental principle in economics.
75
Giffen goods are also known as _____ goods.
inferior goods
76
Short term demand forecasts are generally for a period of _____?
less than one year
77
Least squares method is part of _____?
statistical methods
78
Which of the following pairs is an example of substitute goods?
tea & coffee
79
Demand forecasting enables management to strengthen market position and enlarge _____?
Profit
80
If the price raises, the demand _____?
Falls
81
There are _____ types of price elasticity.
3
82
Which of the following is not an example of complementary goods?
Tea and coffee
83
In case of perfectly elastic demand, the shape of the demand curve is _____?
Horizontal
84
In case of unit elastic demand, the shape of the demand curve is _____?
Hyperbola
85
Sales force opinion method is part of _____?
survey methods
86
Who explained the elasticity of demand concept?
Marshall
87
Define managerial economics?
The integration of economic theory with business practice for decision making and forward planning.
88
What are the main areas of managerial economics?
Demand decision, input output decision, price output decision, profit related decision, investment decision, economic forecasting
89
What is the meaning of micro and macro economics?
Micro economics studies individuals or firms; macro economics studies aggregates.
90
What is demand?
Every want supported by willingness and ability to buy.
91
Demand conditions are _____?
*desire to buy *Willingness to pay *Ability to pay
92
Define law of demand and its exceptions?
The law states quantity demanded rises with a fall in price; exceptions include necessities and Giffens’ paradox.
93
Define demand function and write its mathematical formula?
Demand function describes the relationship between one variable and its determinants; Qd=f(P,I,T,PR,EP,EI,SP,Dc,A,O)
94
Define elasticity of demand?
Rate of responsiveness in demand for a given change in price or other determinants.
95
Explain price elasticity of demand?
Ratio of proportionate change in quantity demanded to proportionate change in price.
96
Explain income elasticity of demand?
Ratio of proportionate change in quantity demanded to proportionate change in income.
97
What is the need for demand forecasting?
To assess likely demand and plan production accordingly.
98
What is the meaning of test marketing?
Releasing a product on a test basis in a limited market to assess success.
99
Explain controlled experiment method?
Experimenting in different homogeneous markets with various appeals.
100
What is the meaning of a normative statement?
A statement reflecting moral attitudes, often including 'ought' or 'should'.
101
Define law of demand?
Shows the relation between price and quantity demanded; demand increases with a fall in price.
102
Define demand forecasting?
Estimate of future demand for a product.
103
Explain short term demand forecasting?
Forecasting limited to one year, concerning sales and production capacity.
104
Explain long term demand forecasting?
Forecasting regarding long-term demand for planning new plants or expansions.
105
Define survey method?
Collecting information about consumer desires and expert opinions through interviews.
106
Define statistical methods?
Used for long run forecasting with statistical and mathematical techniques.
107
Define cross elasticity of demand?
Change in the price of one commodity leads to a change in the quantity demanded of another.

Managerial Economics And Financial Accounting (1 decks)

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