Managerial Economics- Demand and Supply

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue XII, December 2020 | ISSN 2454–6186

Managerial Economics- Demand and Supply

Kwesi A. Sakyi
ZCAS University, P.O. Box 35243, Dedan Kimathi Road, Lusaka, Zambia

ABSTRACT:- In this article, the author explores in a short communication the concepts of demand and supply in relationship to the price mechanism as well as the need for Keynesian market intervention. He further explores the philosophical underpinnings of the idea of the welfare state with regard to merit goods and general wellbeing of citizens.

Keywords: eleemosynary economics, revealed preference, elasticity, opportunity cost, demand, supply, scarcity, choice, human behaviour, wants, needs, price mechanism, equilibrium, Pareto optimality, welfare economics, buffer stock, price floor

Introduction

The word Economics is derived from the two Greek words OEIKOS and NEMOS which mean house management. From that basic definition of household management in the microcosm, the definition has expanded to mean the management of the scarce resources of firms, corporations, entities, and nations. Economics is said to be hinged on the study of scarcity and choice. Lionel Robbins once said that Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternate uses.
This definition is loaded as Economics is said to be a science about human behaviour which is hard to predict because human beings are said to be capricious, volatile, mercurial, kaleidoscopic and unpredictable in their behaviour. Science is any organised body of knowledge which is logical, internally and externally consistent and has predictive ability and explanatory powers to explain phenomena through simplified models.
Ends in Economics refer to human wants and needs though wants are luxuries and needs are necessities of life. Human needs are unlimited relative to the means for satisfying them so the issue of choice arises by having a scale of preference which is a list of our immediate needs ordered according to rank order of importance. Once a choice is made, some other alternate choice has to be sacrificed or foregone.
The foregone alternative is known as the real cost or opportunity cost. This is different from the money or nominal cost of the item chosen. The real cost or opportunity cost refers to the real alternative choice foregone. Let us say Maria has 10 dollars which can buy either a novel or a meal but not both and Maria chooses to eat a meal; then she cannot afford to have the novel. The opportunity or real cost of the meal she chose to have is the novel she gave up for the meal. This choice and scarcity issue confronts every economic entity, be they individuals, firms, nations, MNCs and Conglomerates.

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