Managerial economics and demand analysis

Managerial economics applies economic theory to business decisions: what to produce, how much, at what price, and with what resources. Its core tool is demand analysis. Demand is not mere desire; it is desire backed by ability and willingness to pay, at a given price and time. The law of demand says that, other things equal, a lower price raises quantity demanded and a higher price lowers it — the demand curve slopes downward. Worked example: at Rs 100 a firm sells 500 units; at Rs 120 it sells 400. The price rose 20% and quantity fell 20%, so price elasticity is 20/20 = 1, unitary elastic — a price rise here leaves total revenue roughly unchanged.