How do you think Managerial Economics can help in attaining the

organisational goals and objectives? Explain in your own words and provide
example.

Business is an economic activity that has the main objective of generating

profit either through rendering services, production and distribution of goods, or
selling products with the desire to meet the unlimited wants and needs of human
beings. It is concerned with the actions of individuals that work for a shared
economic purpose. It became an essential and integral part of our world today as
businesses increase people's standard of life by delivering a quality wide range of
products and services at the right time and place. As the demand of society rise, the
enterprise will then need to utilize or make the most of the resources available, no
matter how scarce they are, to maintain the production of goods and for the
continuity of the business; this is why business and economics comes hand in hand.

Economics is known to be the study of the behavior of individuals. It deals

with how to fulfill the endless wants and needs of human beings with the scarce
resources we have. It is about making a rational choice to optimize resource
allocation (Michel, 2016). The main goal of economics is to lessen the gap between
unlimited needs and limited resources. It has two branches, microeconomics and
macroeconomics. Microeconomics deals with the smallest detail in the economy, for
example, demand and supply. On the other hand, macroeconomics deals with the
economy as a whole; for example, issues regarding national income and economic
growth. These two concepts of economics are then combined to make a suitable
managerial decision in the company.

Professor Stefan Michel defines Managerial Economics as a science that

helps explain how can resources such as labor, technology, land, and money be
allocated efficiently. It focuses on the decisions that individuals make, more
specifically, decisions that managers make for the development of the company. It
fills the distance between abstract theory and managerial experience. It depends
more on the form of logic. In short, ‘Economics applied to decision-making’ is
managerial economics. Managerial economics applies to its area of study—
Management Economics. It provides management with a strategic planning
mechanism that can be useful to get a strong viewpoint on how the market
environment functions and what can be achieved to sustain profitability in an ever-
changing environment. As said by Prof Evan J. Douglas, managerial economics
cares with the purpose of economic principles and methodologies to the decision-
making process within an organization or industry. It seeks to lay down rules and
policies to facilitate the achievement of the desired business goals of management.
Managers that deal with managerial decision-making should study and make use of
the economic concepts to make rational decisions.

Managerial economics is characterized as a combination of economic theory

and business experience, such that future planning and decision-making can be
encouraged by the management of the enterprise. It has an incredible potential to
serve numerous purposes and can be useful for decision-making managers by
showing a sort of relationship with the inner world. It focuses primarily on the
economic theory of the growth of a business or an entity by facilitating the decision-
making process.

The study of all sorts of market decisions taken in the company or an

organization is an application of macroeconomics. It undertakes a demand and risk
assessment that can help define the efficiency of goods. It may also be used for the
capital budgeting process. It also helps to create a good outlook by identifying the
different objectives that might help minimize the risk of a company enterprise.
Essentially, it deals with the amount of cash available and the investment cycle with
the option of both projects and processes that might make the economic viability of
different lines of production feasible.

Managerial economics helps the entity to presume and evaluate items. Any
company is trying to make a satisfactory profit even though economics focuses on
optimizing profits. It is also vital to reshape economic theories in a realistic
environment. Through managerial economics, an entrepreneur or a manager can
make a wise decision for the constant growth of their company's income and achieve
its goals despite the economic factors that might affect the production and continuity
of their business.

For business and organizational decision-making, managerial economics

applies economic theory and methods. It prescribes regulations for strengthening
management decisions. Managerial economics also lets managers understand how
economic advantages impact companies and explains the economic consequences
of managerial behavior. It ties conventional economics with decision-making
sciences in order to build critical resources for management decision-making.

Decision-making and forward planning under unpredictable market

circumstances are the primary roles of the manager in the business enterprise. A few
of the crucial management decisions are production decisions, inventory decisions,
expense decisions, marketing decisions, financial decisions, staff decisions, and
miscellaneous decisions. One of the hallmarks of a strong executive is the capacity
to make fast choices. It must have specific priorities, use all the knowledge it can
provide, balance pros and cons, and quick decisions.

Decisions are needed to achieve certain objectives. Objectives are the driving
forces for decision-making. Several actions to meet the goals of quantitative
methods use decision-making. However, it should be acknowledged that actions and
quantitative methods alone can not yield desirable outcomes. It is important to note
that other variables, such as individual and behavioral considerations, technical
pressures, and environmental conditions, affect the choices and decisions of the
manager.

The other definition of decision-making is choice-making, which comes from

the fact that all forms of company arise as a result of certain kinds of changes in
certain circumstances that may come up and occur in unseen contexts. In such
cases, survival and development can be decided explicitly by a decision-making
process. It is known as the best variety available that provides two or more
alternatives.

The method or framework of managerial economics is essential for any

organization, as it helps to improve various leadership skills. It encourages the
development of a decision-making mechanism that is highly successful and allows
the corporation or the entity to produce good profits. Managerial economics should
enrich the manager's conceptual and technical skills. It is concerned with the
economic behavior of the company that will reflect on the decision process, decision
model, and decision variable factors at the firm stage. It is the use of economic
analysis with corporate decisions to be analyzed.
 An example of how managerial economic helps in reaching organizational
objectives and goals is when an enterprise or an organization encounters a sudden
recession. Recessions affect all sorts of companies, big and small, due to tighter
lending constraints, slower demand, and general anxiety and uncertainty.

In this time of the pandemic, it is very crucial for the management to use
managerial economics. Many organizations lose profit because of the low demand
for products. Think of those make-up brand companies that are known for producing
quality lipsticks. Because of the COVID-19 pandemic, the wearing of face masks is a
requirement as protection from the quick spread of viruses. This event can result in
fewer people wearing lipsticks, for it can't be noticeable beneath the mask. As a
manager of that company, the pandemic must be in consideration in the production
of goods. Through applying economics in making a decision, a manager will then
decide whether to provide the same quantity of lipsticks way back when there was
no pandemic. Considering the small need for wearing lip products, the company
should produce a lesser number of lipsticks and invest more in making eye products
that would be more in demand despite the ongoing pandemic and will be more
profitable for the company.

In conclusion, the general role of managerial economics in helping the

company to meet its objectives is to improve the level of decision-making ability of
business owners or managers by selecting the best possible option in the case of
choices to improve their business income. It analyzes adjustments in
macroeconomic factors such as national income, population, market cycles, and
their potential effects on the operation of the organization. Managerial economics
can help minimize risk across various models of analysis, such as decision analysis.
Heavy use of statistical probability theory aims to provide alternative scenarios for
companies to use when making decisions.