Meaning of Managerial Economics
Firstly we explain meaning of managerial economics :-
Economics
- The study of how individuals, firms, organizations, etc., make choices about the allocation of scarce resources to achieve a stated goal.
Manager
- A person who directs resources to achieve a stated goal.
Managerial Economics
-The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
Many authors given the definition
Definition of managerial economics:-
"Managerial economics can be viewed as an application of that part of microeconomics that focuses on such topics as risk, demand, production, cost, pricing, and market structure." -Petersen and Lewis
"Managerial economics is concerned with the ways in which managers should make decisions in order to maximise the effectiveness or performance of the organizations they manage." - Edwin Mansfield
"Managerial economics is the study of allocation of resources available to a firm among the activities of that unit."- Hynes
Nature's of Managerial economics
1. Close to Micro-Economics- finding solutions managerial problems of a particular firm (production schedules)
2. Operates against the backdrop of Macro-Economics - macroeconomic conditions of the economy are also seen as limiting factors for a firm to operate. (industrial policy and Inflation)
3. Normative Statements - one problem with normative statements is that they cannot be verified by looking at the facts, because they mostly deals with the future. (agreement or disagreement - L.P.G.)
4. Prescriptive Action - suggest the course of action from the available alternatives for optimal solution. (mention concept to given context)
5. Applied in Nature - case study method to conceptualize problem
6. Offers scope to evaluate each alternative- cost and revenue
7. Interdisciplinary- drawn from different subjects (as mentioned)
8. Assumptions and Limitations- validity is not universal (changes)
Importance of managerial economics
* It provides tool and techniques for managerial decision making.
* It gives answers to the basic problems of business management.
* It supplies data for analysis and forecasting.
* It provides tools for demand forecasting and profit planning.
* It assists the management to know internal and external factors influence the business.
* It guides the managerial economist. .
* It helps in formulating business policies.
* It assists the management to know internal and external factors influence the business.
SCOPE OF BUSINESS ECONOMICS:
Business or managerial economics is an growing subject. As this is a developing science, it is difficult to explain the boundaries of the subject. The scope of the subject widens according to the growth of the subject. The discussion on the following fields gives the
scope of business economics upto certain extent. They are
1.Demand Analysis and Forecasting
2.Cost and Production analysis
3.Pricing Decision, policies and practices
4.Profit management
5.Capital (Investment) Management and
6 Risk and uncertainty analysis
Objectives of Business Economics
* To integrate economic theory with business practice.
* To apply economic concepts and principles to solve business problems.
* To employ the most modern instruments and tools to solve business problems.
* To help achieve other objectives of a firm like attaining Industry leadership, expansion of the market share
* To help in formulating business policies.
* To allocate the scarce resources in the optimal manner.
* To help in profit maximization.
* To minimize risk and uncertainly.
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