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Archive for June, 2008

Economics is a social science. It has been commonly observed that people, while living in a society, show a similar economic behaviour. This economic behaviour in different aspects of economic life has been summed up as a set of generalisation which is known as economic laws. Thus an economic law is a statement, concluded and inferred, on the economic behaviour of the people in general. In other words, economic laws are supposed to govern and explain all economic activities of the people living in a society.
Reference to Robbins definition it can easily gather that the use of limited resources in a pursuit to satisfy unlimited wants, reflect the economic laws are the statements of tendencies by which human beings make use of scare resources, obviously in an alternative fashion, with a view to satisfy unlimited wants.For example the general tendency on the part of the people is that they purchase more at a lower price and vice versa, if all other things remain constant. This economic tendency has been generalised as an economic law called law of demand. Similarly, many economic laws have been made to cover tendencies in the economic life e.g. law of diminishing marginal utility, law of supply, law of substitution, law of variable proportions etc.

The study of economics, founded as a separate academic discipline in the 18th century, is an inexact science – largely because complex patterns of human behaviour have to be reduced to gross simplifications to enable economists to analyse them. Nevertheless, some general observations are known as laws.

Law of Diminishing Returns That if one factor of production – staff, say – is continually increased while the others remain constant, eventually the point is reached where each new unit of increase brings a smaller addition to production than the previous one. In a car cruising in top gear, for instance, each additional litre of petrol (gas) used produces a smaller and smaller increase in speed, so that a car cruising at 100km/hr (58 mph) uses more than twice as much petrol as a car travelling at 50km/hr (29 mph). Also known as the Law of Variable Proportions.

Gresham’s Law That ‘bad money drives out good’. Or, that debasing the metal content of coinage lowers the value of money, since owners of unadulterated coins tend to hoard them or melt them down to purchase a greater number of debased coins. Attributed, with no foundation, to Elizabeth I’s financial adviser, Sir Thomas Gresham. Probably first stated by the Polish astronomer Nicolaus Copernicus.

Iron Law of Wages That if wages rise above subsistence level, they produce a higher birthrate and expand population, which in turn forces wages down to subsistence level again. Given wide currency by British economist David Ricardo, but French origin. Not now accepted, since in the 20th century wealthy nations have in practice tended to have lower birthrates than poor nations.

Parkinson’s Law That work expands to fill the time availasble to do it. Or, that the amount of work done varies inversely to the number of people employed. Humorously (but still seriously) published by the British economist Cyril Northcote Parkinson in 1958.

Peter Principle That in any organisation every employee rises to his level of incompetence. All valuable work is therefore done by people who have not yet reached that level. Another satirical law, published by a Canadian-born author, Professor Lawrence J. Peter, in 1969.

Say’s Law. That every rise in the supply of goods produces an increase in demand for them. Stated by the French economist Jean-Baptiste Say in 1803. True only for barter economies, but generally believed until the Great Depression.

Law of Supply and Demand That competition between consumers and producers brings the supply of goods and the demand for them into balance. Cardinal ‘law’ of free-market economic theory. Overproduction lowers prices, increasing demand; over consumption raises prices, reducing demand.

The concept of elasticity of demand is very important in economic theory and policy. It is used to measure the effect of changes in price on quantity demanded. It is known that according to the law of demand, if price decreases the demand increases and if price increases the demand falls.
The quality of demand to change with changes in price is called the elasticity of demand.

By definition, then, the elasticity of demand is the rate at which the quantity demanded changes in response to a change in price.
Its formula is: Ed = percentage change in quantity demanded/percentage change in price.

This rate of change in demand varies according to commodities, market and consumers. At times a small change in prices has a big effect of demand. This phenomenon is called elastic demand. This effect is usually seen when consumers have more buying options. There are also situations when a large change in price has a small effect of demand. This is called inelastic demand. Commodities like basic food items like salt tend to show inelastic demand.

A perfect elastic demand exists when demand increase with no change in price. This is called infinite elasticity. A situation of zero elasticity result when lowering the price does not increase the demand.

Management is the process of getting activities completed efficiently and effectively with and through other people.

• Definition 1
  Organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of clearly defined objectives. Management is often included as a factor of production along with machines, materials, and money. According to the management guru Peter Drucker (1909-2005), the basic task of a management is twofold: marketing and innovation. Practice of modern management owes its origin to the 16th century enquiry into low-efficiency and failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478-1535).
• Definition 2
  Directors and managers who have the power and responsibility to make decisions to manage an enterprise, As a discipline, management comprises of the interlocking functions of formulating corporate-policy and organizing, planning, controlling, and directing the firm’s resources to achieve the policy’s objectives. The size of management can range from one person in a small firm to hundreds or thousands of managers in multinational companies.

• Plan
  Management starts with planning. Good management starts with good planning. And proper prior planning prevents… well, you know the rest of that one.
  Without a plan you will never succeed. If you happen to make it to the goal, it will have been by luck or chance and is not repeatable. You may make it as a flash-in-the-pan, an overnight sensation, but you will never have the track record of accomplishments of which success is made.

  Figure out what your goal is (or listen when your boss tells you). Then figure out the best way to get there. What resources do you have? What can you get? Compare strengths and weaknesses of individuals and other resources. Will putting four workers on a task that takes 14 hours cost less than renting a machine that can do the same task with one worker in 6 hours? If you change the first shift from an 8 AM start to a 10 AM start, can they handle the early evening rush so you don’t have to hire an extra person for the second shift?

• Organize
  Now that you have a plan; you have to make it happen. Is everything ready ahead of your group so the right stuff will get to your group at the right time? Is your group prepared to do its part of the plan? Is the downstream organization ready for what your group will deliver and when it will arrive? Are the workers trained? Are they motivated? Do they have the equipment they need? Are there spare parts available for the equipment? Has purchasing ordered the material? Is it the right stuff? Will it get here on the appropriate schedule?
  Do the legwork to make sure everything needed to execute the plan is ready to go, or will be when it is needed. Check back to make sure that everyone understands their role and the importance of their role to the overall success.
• Direct
  Now flip the “ON” switch. Tell people what they need to do. I like to think of this part like conducting an orchestra. Everyone in the orchestra has the music in front of them. They know which section is playing which piece and when. They know when to come in, what to play, and when to stop again. The conductor cues each section to make the music happen. That’s your job here. You’ve given all your musicians (workers) the sheet music (the plan). You have the right number of musicians (workers) in each section (department), and you’ve arranged the sections on stage so the music will sound best (you have organized the work). Now you need only to tap the podium lightly with your baton to get their attention and give the downbeat.
• Monitor
  Now that you have everything moving, you have to keep an eye on things. Make sure everything is going according to the plan. When it isn’t going according to plan, you need to step in and adjust the plan, just as the orchestra conductor will adjust the tempo.
  Problems will come up. Someone will get sick. A part won’t be delivered on time. A key customer will go bankrupt. That is why you developed a contingency plan in the first place. You, as the manager, have to be always aware of what’s going on so you can make the adjustments required.
  This is an iterative process. When something is out of sync, you need to Plan a fix, Organize the resources to make it work, Direct the people who will make it happen, and continue to Monitor the effect of the change

Mary Parker Follett (1868–1933), who wrote on the topic in the early twentieth century, defined management as “the art of getting things done through people”. One can also think of management functionally, as the action of measuring a quantity on a regular basis and of adjusting some initial plan; or as the actions taken to reach one’s intended goal. This applies even in situations where planning does not take place. From this perspective, Frenchman Henri Fayol considers management to consist of five functions

1. Planning
2. Organizing
3. Leading
4. Coordinating
5. Controlling

Some people, however, find this definition, while useful, far too narrow. The phrase “management is what managers do” occurs widely, suggesting the difficulty of defining management, the shifting nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class.

Speakers of English may also use the term “management” or “the management” as a collective word describing the managers of an organization, for example of a corporation. Historically this use of the term was often contrasted with the term “Labor” referring to those being managed.

MBO is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are.
The term “management by objectives” was first popularized by Peter Drucker in his 1954 book ‘The Practice of Management’.
Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.
It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.
Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book ‘The Practice of Management’. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: “It’s just another tool. It is not the great cure for management inefficiency… Management by Objectives works if you know the objectives, 90% of the time you don’t.”

1. Top-level Management
   Top-level managers require an extensive knowledge of management roles and skills.
   They have to be very aware of external factors such as markets.
   Their decisions are generally of a long-term nature.
   They are responsible for strategic decisions.
   They have to chalk out the plan and see that plan may be effective in future
2. Middle Management
   Mid-level managers have a specialized understanding of certain managerial tasks.
   They are responsible for and carrying out the decisions made by top-level management.
   They are responsible for tactical decisions.
3. Lower Management
   This level of management ensures that the decisions and plans taken by the other two are carried out.
   Lower-level managers’ decisions are generally short-term ones.
   They are responsible for operational decisions.