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    Chapter 1 Nature, Scope and Practice of Managerial Economics eosomica—ich isthe study ofthe allocation of saree means amon, sumeroe, if 0 unmite,eads—sust have something to sy Wo be manage. /p Ase tee ined wires of nop wae Cesta gals, object obo itemal and exe contains. An economist an {Sve adie to any manager sho may or may oot be working fora proit-making Sraanzaton. The eee of management isnot the accumulation of profit but testament of cern goals though the cpinun use of both physical and ‘aman resnarces athe comand of on organization Ta this back, we sal be using the exjreson“ammageial economics” to sefertoatranch of economies which sade the pplication ofthe theories, tools, ‘nd findings of economic analyi © manager decision-making in al types of ‘ruaizion, ncoing goverment genes, educational centers, o-for profit foundations, nd of coure, busines enepies Our examining the ature and ‘cope of manag economics shal be guide by two iterelatd objectives 4 Po ena demi ots oft ine ‘emai he nage f Pp onions Sit eh wonton ce ‘yen ceed iin ch og an Slay Crete cnt of comm eon ang a Philipines today, “st Not exchsvely for basiness wy in eeat yams, basinesamen have become increas ‘nd inert in he application of economic nly the problem they fee i ia tab yi a iio Ri a ae a Coc ct Serene ae et cian rity Sema Sr Ses Ser Nes ors orm oo Sie et tlie G com ote eae Sere aires at he i Sc ert er oe g Peres aie tel pom On enh be ini Sac tae nem mat et eg mee see mame eee ates PT died iE tcc oftrcend sini degen liscncantang ae ere ee arse bec eich eee eee Saal fen aie nota ms enn oc erent Nt seme Do ee oe ee eee et Saree nee ee vii ta tn empl ad sc ces RS a ee veel ren See ee as oe ee i ees Be ee eras Se Stee ee St a oe Se sie biosensors ors rae ome na nose hee eee ee ores ess i soe Be Se eraeacy as reer oe eee a ir erecta Cesena See ae ee es eee ee ay eae aes an ew me semper a mb aioe for ere eee TT TT ch ce ie eee eer ce Peet coe ae ee See eee ore ee aes ee enna ie The development of the whole peroralty a the objective ofthe schol i fnded, inti But tachng cil fo red bythe ne be fies hit ere is hy no mean intngite and\can he measured csly amd with consdeabie P= "rr abolah rca crimination is equally ict of let operations dt ation, let alone of menstremest But to icreae the mur af Back apres evoiliog tades hn gunna geal, e ataament oe the nonttnne at which can be mented.” NATURE, SCOPE AND PRACTICE OF MANAGERIAL ECONOMICS 3 is now clear thatthe scope of managerial economics embraces all orgaai- zations, including non-besiness organizations. The study of the science Of source allocation atthe level ofthe organizational units must for all manages ‘of human institutions if society fs o achieve ie mumerows objectives in a works limited resources. Economics for managers 1 must be pointed out tht, like any other Aedgling branch of science, swanageril economics is by no means a cleily defined ate of stay, The natare and scope of mantgril economics are subject to great de of ively dis. cussion and debate among the theorsts and practioner We do aot plan 0 sete the debatable poins here. In fc, o¥r approach will be eclectic: we shall, present the major divergent views about the mare and scope of managerial conomic. We fee hat this approach will serve best the nv0-fold objectives of this caper. ‘Before we focws on manageial economics a8 such, i would be hep 1 ising from other branches of economics that are equally important for ‘2 manager study but do wo fal sity speaking within she sphere of managerial ‘economics. Fist, there i that generl study of economics which i ceded by any person who has 1 make intelieat decisions within piven economic system ‘The comsumer, the Wage eater” the bor deion ficial, the President Of the Philippines, the professional tbe rere employer cc. —all have to make economic ‘decisions inthe light of what is Rappening inthe society im which they live or ‘pene. The problem of sarcky and the cretion of additonal new wants have ‘become more universal than ever. A miimum of economic literacy 1 now ‘equited for anyone 10 make an economic decision intelligently democrat ‘Societies, economic iteracy is lso needed for enlightened political decision, eg eciding on which candidate has Deiter plan wo elimieate mass unemploymesi, “Thus, the manager nceds to understand the so-called “mmcroecomomc” forces hat ffecthe economy ofthe nation a whole, for these Significantly inflcace ‘his main functions of planning. directing, and coming. ‘To illustate this point, le us tke the consumer. He bis to make quite a smumber of plams or require 2 minimum understanding ‘of the {foxes tend inflation (s0 thee can decide whether or not 10 stock-up On 4 paricolar commodity); the of imterest mates (0 that he can decide ‘whether or not o purchase an appliance on iastallmtenty; andthe workings ofthe foreign exchange market (0 that be ean plan out what to do should there be other devaluation). Whether ei conscious of ior not, the present ay consemet ‘assumes all ypes of relationships among such ageregative (macroccomomic) forces as money supply, Gross National Product, nterational eserves, ta labor {lye Is impeaive tha be leans how wo formulate such vel cones "more scicstiie manner, ik i i ii i stig see oe en eed nim, Sony Riya ones orale a ee Se damper cesng sed anda he sons st Sree ce tes ert oestrone Sep eS Some eee See ere enn a era See ree oes ree mie aoe Se ae eee Soe eric se ery ln aan mere meron ae eee ee See oon aiog ee rae Microeconomic theory Pat ofthe poo! of knowledge in economics that must be comimiticated > ‘e manger to help bim understand the economie environment in wich he fopentes lemicreconomic theory—the ranch of economics which sees the Uehavior of prices, cost, and other economie magnitudes that rest fom te Smeractions among the stall units hat mae up the economic system, econ ‘sumer firms, owners of factors of production, public regulating agence, ee ‘The study of microeconomics is ax important to the professional manager as it is ofher decsionmkers in te economy. ‘Oace again itis mecessary to point out that microeconomic theory & not sysonymout sith managerial economics, although there tsa gret de of ‘overlapping in subject mater In is microeconomic aspects, alsagerial econ imies provides theory ofthe ential factors for siceesful performace In Industry. 1 also gives insight on chinging competitive actions snd sections ‘among firms in an industry. A.stady ofthe behavior of busines fms need not be considered past of managerial economies, ifthe primary purpose ofthe =tvdy {i n enlighten decision-making a the level ofan industry aisccation or of 3 government agency concerned with the segulation of basiness. Let us take, for eximple, the inferest of the Secures and Exchange ‘Commision (SEC) in the formoletion of antb-trat measures which a mest appropriate to the Philippines today. Such questions as the mature of oigopli tic bebavir, the pros and cons of a monopoly, and the regulation of co-host ‘competition canot be stndied wathowt a berwy dosage of microeconomic theory Bot they need not fal under managerial economics Hf the incest party is # [government repaliory body. Team at the appropiate ant-tuslepisltion and jurisprudence, & detailed study of Philippine market structures and rested Imieroecooomic theories shouldbe undertaken, Of course, we cannot sty ape ‘American judspmidence i ant-nst measures, The Philippine esooiny Is que | sso urinating 1 distinguish manager economic fom industri cconomics, another sebject within microeconomic theory. India economia (ich the fed of speciliztion of the Center for Reseach and Comme ‘ation — private, not-for profiteconomic research cee in Mani) stadies the ‘sructues end intereationships among the major industries inthe economy. A

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