What is Managerial Economics?

- uses economic theory and analysis in business firms and other organizations. All of
these definitions of managerial economics have one thing in common: using a
framework of analysis to make decisions that maximize the firm’s goals, often in an
uncertain environment. It is important to know that decisions made with the help of a
framework of analysis are more likely to work out than decisions made on the spot or
based on a gut feeling. Here we are discussing the importance of Managerial Economics
in aspects of Business
Why Managerial Economics is important?

- It helps managers to make rational decisions by analyzing challenges and applying

principles in economics. It enables managers to handle and operate the business
efficiently. It is a significant aspect of any business as it efficiently connects theoretical
knowledge with practical applications.
Importance of Managerial Economics:
Major Importance of Managerial Economics
1. It places emphasis on the use of economic theory and the tools of financial statement
analysis to make better decisions.
2. Managerial Economics helps in business planning.
3. Inventory is properly managed during the business activities.
Top 7 Importance of Managerial Economics
1. Business Planning
Managerial economics contributes to business organizations in formulating plans and better
decisions. It helps in analyzing the demand and forecasting future business activities. It is
managerial economics importance.

2. Cost Control
Cost Controlling the price is another essential role played by managerial economics and it’s
important for every business. It properly analyses and decides production activities and
therefore the cost related to them. Managerial economics makes sure that all resources are
efficiently utilized which reduces the general cost.

3. Price Determination
Setting the proper price is one of the key decisions to be taken by every business. It is
managerial economics importance. Managerial economics Distribute all relevant data to
managers for deciding the proper prices for products.

4. Business Prediction
Managerial economics through the appliance of varied economic tools and theories helps
managers in predicting various future uncertainties. Timely detection of uncertainties helps in
taking all possible steps to avoid them.

5. Profit Planning and Control

Managerial economics allows for planning and managing the profit of the business. It makes an
accurate estimate of all costs and revenue which helps in earning the specified profit.

6. Inventory Management

Proper management of inventory may be a must for ensuring the continuity of business
activities. It helps in analyzing the demand and the production activities performed. Managers
can arrange and make sure that the right quantity of inventory is usually available within the
business.

7. Manages Capital
Managerial economics helps in taking all decisions concerning the firm’s capital. It properly
analyses investment avenues before investing any amount into them to make sure the
profitability of an investment. It is the main importance of managerial economics in a business or
as an organization.