Definition: Managerial economics is a stream of management studies which emphasises solving business problems and decision-making by applying the theories and principles of microeconomics and macroeconomics. It is a specialised stream dealing with the organisation's internal issues by using various economic theories. Economics is an inevitable part of any business. All the … [Read more...] about Managerial Economics
Law of Diminishing Marginal Utility
Definition: The law of diminishing marginal utility explains that with the consumption of each subsequent unit of a commodity, the satisfaction anticipated or derived from it goes on declining. The point at which the consumer no more feels the need for consuming a particular product is referred to as the 'Point of Satiety'. This is the point where the marginal utility curve … [Read more...] about Law of Diminishing Marginal Utility
Marginal Utility (MU)
Definition: Marginal utility (MU) is the utility acquired from consuming an additional unit of a commodity. Utility refers to the ability of a product to fulfil a person's need, want or desire, which keeps on diminishing as the following unit of a commodity is consumed. Formula of MU Though a utility cannot be measured in exact numbers, it is up to the consumer to represent … [Read more...] about Marginal Utility (MU)
Budget Line
Definition: A budget line is a straight line that slopes downwards and consists of all the possible combinations of the two goods which a consumer can buy at a given market price by allocating all his/her income. It is an entirely different concept from that of an indifference curve, though they are both are essential for consumer equilibrium. The two essential components of … [Read more...] about Budget Line
Indifference Curve
Definition: An indifference curve is a convex shaped curve depicting the graphical representation of the different combinations deriving the same level of satisfaction to the consumer by considering two commodities. It functions on the principle of the diminishing marginal rate of substitution (MRS). Example: A person went to the grocery store to buy cereals and … [Read more...] about Indifference Curve
Moral Suasion
Definition: Moral suasion is a step taken by the central bank for convincing and advising the commercial banks to adhere to the policies and act in the desired manner through general interaction. 'Moral' means defining one's code of conduct based on a clear distinction between right and wrong. 'Suasion' refers to the process of advising, convincing or influencing others without … [Read more...] about Moral Suasion
Cost Classification
Definition: Cost classification is the logical process of categorising the different costs involved in a business process according to their type, nature, frequency and other features to fulfil accounting objectives and facilitate economic analysis. Cost refers to the value sacrificed with the aim of gaining something in return. Every business process involves some cost. It is … [Read more...] about Cost Classification
Cost Accounting
Definition: Cost accounting is the accounting method for ensuring cost-effectiveness by accumulating, organising, recording, calculating, analysing and assessing the overall expenses incurred on a product, process or project, etc. It is mostly used in industrial units or factories where the goods are manufactured. Unlike financial accounting, cost accounting is a broader … [Read more...] about Cost Accounting
Opportunity Cost
Definition: Opportunity cost refers to the value of the other choice sacrificed while choosing a better or suitable alternative. It is also termed as alternative cost. There are limited resources or limited spending capacity and to direct these resources in the direction of deriving maximum satisfaction, we find out the opportunity cost. Example: Let us now understand the … [Read more...] about Opportunity Cost
Marketing Mix
Definition: Marketing mix is a tool for ensuring a successful marketing process by analysing the consumer's need, determining the cost to be incurred on the product or service, deciding a proper distribution channel, communicating the product idea and information to the customers, developing a strong marketing team, channelizing the marketing activities and adjusting to the … [Read more...] about Marketing Mix