PRACTICAL APPROACH TO TEACH MANAGERIAL ECONOMICS
 

Economics once called a dismal science by a great economist has really become one for the present management students. Unless the teachers and the students understand the real implications and practicality of the subject and its relevance in decision making, the subject remains one of the academic interests for them. Some may ask as to what is wrong with the conventional style of teaching managerial economics? The answer lies in the fact that it is not connected with real-life business situations most of the time. This is in contrast to the very evolution of economics as a subject, thus becoming one of the fields of knowledge that is heavily drawn from real life instances across the globe. It has converted itself from its pure form to the application side for the convenience of the managers to support their decision making. We have ample examples to substantiate this point.

Management is a continuous process as is economics. It deals with the day-to-day activities of a manager. It provides continuous opportunity to the manager to make decisions: every time a new one which is different from the earlier decisions. The pragmatic environment faced by the managers is completely ignored and overlooked in the four walls of a static classroom, the lecturer rarely applies the theoretical aspects of the concepts in the day to day decision making of a managers life. At the end of it, neither the teacher nor the students realize the importance of what was taught to them.

The need of the hour is to intellectually build up a new methodology, or utilize the existing one in an innovative fashion so that the practical aspects of the subject become more highlighted. The various concepts of the subject have to be applied, adapted and confronted in a variety of situations, linking not only the concepts with practice but also establish links amongst various concepts to provide a wholesome and comprehensive orientation of the subject.

The focus of economics has always been on the optimum utilization of the existing resources. The assumption here is that the resources are always scarce when compared to the needs and thus the problem of choice. This problem of choice remains the core concern of householders, firms and also of the economy as a whole. The housewife finds it a challenge every month to manage her expenditure to the sudden changes in the prices of LPG or sometimes it is the additional requirement of an item due to unforeseen circumstances. The same problem confronts right from our kitchen to the finance minister’s ritualistic annual budgets. Everywhere lies the utility of economic concepts and optimization. It just requires a little reorientation on the part of teachers to understand this minute aspect of the approach and more importantly implement it.

Let us take an example to make this aspect more clear. We all know that the subject matter of economics basically talks about the demand concepts, its elasticity, the production function and its concepts, the cost analysis, supply function, market structures, pricing of the commodities and services, the strategies used, the determination of profits and its distribution, linear programming, game theories and many other aspects.

The main concentration of the entire exercise is to try and find out the main concepts of learning in managerial economics that needs to be imparted to the students through a new methodology of teaching so that a more practical orientation to the entire theme could be given. 

The various approaches available to a teacher range from a case study, reader activity, and classroom discussions to games and simulations. (See the table for more details).

(Appropriate tools are marked *)
 

For example the simple principle of the diminishing marginal returns can be explained to the students with the help of a game followed by some reading and mathematical exercises. The simplest of many games does not require anything more than some paper strips, pins and a stapler. The concepts that could be explained are fixed capital, variable factors, inputs, limited resources, choice, the three stages of the law of returns, its applicability, the exceptions to the law, the relationship between the cost concepts and the factors of production, the relationship between the returns on production and the cost of production, the types of costs, the relation of cost with output, pricing the product and the concept of profit and many other related concepts. And there we find the missing link.

In a similar manner the concept of demand elasticity can be explained using a small practical assignment to the students to observe the consumer behaviour in a large food joint or a super market and note down whatever they observe or prepare a report of these observations. For Demand forecasting students can be encouraged to interact with the companies of their choice to ascertain the techniques used in those companies to forecast demand.

Simulations can be used to explain the market structures and the games can be introduced to explain the price determination in each of the different market situations. All these and much more can be done. The only aspect that we need to remind ourselves is again and again is frequent and dynamic reorientation.

G Bharathi
Faculty - Economics
Aurora's PG College, Hyderabad
pg@aurora.ac.in