Assignment Two

Managerial Economics is a science dealing with effective use of scarce resources. It guides the managers
in taking decisions relating to the firm's customers, competitors, and suppliers as well as relating to
the internal functioning of a firm

The role of managerial economics, which is the core focus in theoretical sense of this paper, is in
identifying and predicting possible changes.

1. Managerial Economics- Managerial economics deals with the application of the economic
concepts, theories, tools, and methodologies to solve practical problems in a business. In other
words, managerial economics is the combination of economics theory and managerial
theory. Decision Making - Decision making is the process of making choices by
identifying a decision, gathering information, and assessing alternative resolutions. Per
Capita Income - measures the average income earned per person in a given area (city,
region, country, etc.) in a specified year. It is calculated by dividing the area's total
income by its total population
2. Minimizes risk and uncertainty Helpful in Analysis of Effects of Government Policies
Helpful in Profit Planning and Control Useful In Demand for Casting Helpful in Cost
Control Measurement of the Efficiency of the Firm
3. Risk Situation where there is more than one possible outcome to a decision and the
probability of each outcome is known Uncertainty – Situation where there is more than
one possible outcome to a decision and the probability of each outcome is unknown
Managerial Economics helps in minimizing risk by measuring risk that the business can
meet, these can be caused by the following; Economic atmosphere in the country By
measuring the per capita income
4. Managerial Economics helps in analyzing the effect of the various policies of the
Government in the operation of the business sector. When The government changes
policies Managerial Economics exploits this easily and benefits the business.
Government policies may use tax incentives to direct economic conditions, this is when
economic managers can either decrease or increase production
5. Managerial economics helps managers to decide on the planning and control of the
benefits. Managerial Economics is synchronized between the planning and control of
any institution or firm and hence its importance increases.
6. Managerial economics provides useful tools for economics managers in demand
forecasts and is useful in demanding production planning. The managerial economy
deals with future losses easily. So that any business can be protected against future losses.
7. It is the job of managerial economics to say how much to spend in business and how to
spend those expenses so that it can get more profit at lower costs and increase business
growth. Managerial economics decides the business is going towards profit or loss.
Managerial economics decides which way is good for the business. And it is only
possible when managerial economics plays a very big and important role in cost control
decisions.
8. Managerial Economics provides useful tools for managers in measuring the efficiency
of the business firm. Managerial Economics plays big salient features and significance of
managerial economics In Choosing Right Decisions in helping business in many ways. It
 shows the firm’s successful operation; › Demand forecasting, › Business planning › Profit
maximization and economic well-being.
9. 19 Role And Importance Of Managerial Economics - https://www.googlesir.com/role-
importance-managerial- economics/ Bade, R., and M. Parkin. Foundations of
Microeconomics. New York: Addison-Wesley, 2002. Bator, F. M.“The Anatomy of
Market Failure.” Quarterly Journal of Economics, August (1958) pp. 351–379.
Folksinger, J. “On Optimal Public Good Provision with Tax Evasion.” Journal of Public
Economics, 45 (June 1991), pp. 127–133. Friedman, L. S. Microeconomic Policy
Analysis. New York: McGraw-Hill, 1984. Hope, S. Applied Microeconomics. New
York: John Wiley & Sons, 1999. Hyman, D. N. Public Finance: A Contemporary
Application of Theory to Policy, 3rd ed. Hinsdale, IL: Dryden Press, 1990.

2.Marginal analysis can also help in the decision-making process when two potential investments
exist, but there are only enough available funds for one. By analyzing the associated costs and
estimated benefits, it can be determined if one option will result in higher profits than another.

Principle of marginal analysis: the optimal quantity of an activity is the quantity at which marginal
benefit is equal to marginal cost.