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Business Economics Meaning Nature Scope and Objectives
Business Economics Meaning Nature Scope and Objectives
1.Microeconomics: It studies the problems and principles of an individual business firm or an indi-
vidual industry. It aids the management in forecasting and evaluating the trends of the market.
2.Normative economics: It is concerned with varied corrective measures that a
management undertakes under various circumstances. It deals with goal
determination, goal development and achievement of these goals. Future plan-
ning, policy-making, decision-making and optimal utilisation of available
resources, come under the banner of managerial economics.
7.A scientific art: Science is a system of rules and principles engendered for
attaining given ends. Scientific methods have been credited as the optimal
path to achieving one's goals. Managerial economics has been is also called a
scientific art because it helps the management in the best and efficient utilisa-
tion of scarce economic resources.
8.Prescriptive rather than descriptive: Managerial economics is a normative and applied discipline.
It suggests the application of economic principles with regard to policy formulation, decision-mak-
ing and future planning. It not only describes the goals of an organisation but also prescribes the
means of achieving these goals.
b) Cost and Production Analysis: Production deals with the physical aspects of the
business investment. It is the process whereby inputs are transformed into
outputs. Efficiency of production depends on ratio in which various inputs are
employed absolute level of each input and productivity of each input. A pro-
duction function is the relation which gives us the technically efficient way of
producing the output given the inputs. The firm must undertake cost estima-
tion and forecasting to judge the optimality of present output levels and
assess the optimal level of production in future.
e) Market Structure and Pricing Policies: Managerial economics helps to clear sur-
plus and excess demand to bring market equilibrium as there is continuos
changes in market. Success of business firm depends on correctness of price
decisions. Price theory works according to the nature of the market depend-
ing on the number of sellers, demand conditions etc.
i) Risk and Uncertainty Analysis: As business firm have to operate under condi-
tions of risk and uncertainty both decision making and forward planning
becomes difficult. Hence managerial economics helps the business firm in
decision making and formulating plans on the basis of past data, current infor-
mation and future prediction.
(b) Which is the least cost production technique and input mix?
(c) What should be the level of output and price of the product?
To employ the most modern instruments and tools to solve business prob-
lems.