Managerial economics integrates economic theory with business administration to facilitate managerial decision-making. It involves analyzing problems related to business decision-making. Managerial economics helps managers identify economic choices and allocate scarce resources to achieve organizational goals. It provides analytical tools to improve decisions and links traditional economics to managerial sciences. Key applications include demand analysis, cost analysis, production/supply analysis, pricing, profit management, and capital management.
Managerial economics integrates economic theory with business administration to facilitate managerial decision-making. It involves analyzing problems related to business decision-making. Managerial economics helps managers identify economic choices and allocate scarce resources to achieve organizational goals. It provides analytical tools to improve decisions and links traditional economics to managerial sciences. Key applications include demand analysis, cost analysis, production/supply analysis, pricing, profit management, and capital management.
Managerial economics integrates economic theory with business administration to facilitate managerial decision-making. It involves analyzing problems related to business decision-making. Managerial economics helps managers identify economic choices and allocate scarce resources to achieve organizational goals. It provides analytical tools to improve decisions and links traditional economics to managerial sciences. Key applications include demand analysis, cost analysis, production/supply analysis, pricing, profit management, and capital management.
with business practice for the purpose of facilitating decision-making and forward planning by management.” Brigham and Pappas believe that managerial economics is “the application of economic theory and methodology to business administration practise.” Hague, on the other hand, views managerial economics as “a fundamental academic subject which seeks to understand and to analyse the problems of business decision-making”. ME is concerned with decision-making of economic nature. This implies that managerial economics deals with identification of economic choices and allocation of scarce resources. ME is goal-oriented and prescriptive .It deals with how decisions should be made by managers to achieve the organisational goals. ME is pragmatic. It is concerned with those analytical tools which are useful in improving decision-making. It is both conceptual and metrical. An intelligent application of quantitative techniques to business. It provides a link between traditional economics and the decision sciences for managerial decision-making (1) Helpful in organising (2) Helpful in Planning (3) Helpful in decision-making (4) Helpful in Co-ordination (5) Helpful in formulating business policies (6) Helpful in cost control (7) Helpful in Demand Forecasting (8) Minimising Uncertainities (9) Helpful in forward planning (10) Helpful in understanding external environment 1. Demand Analysis and forecasting, 2. Cost Analysis 3. Production and Supply Analysis 4. Pricing decisions, Policies and Practices 5. Profit Management 6. Capital Management Demand analysis helps identify the various factors influencing the demand for a firm’s product It is essential for business planning and occupies a strategic place in Managerial Economics It mainly consists of discovering the forces determining sales and their measurement. A study of economic costs, combined with the data drawn from the firm’s accounting records, can yield significant cost estimates that are useful for management decisions The factors causing variations in costs must be recognised An element of cost uncertainity exists because all the factors determinig costs are not always known as controllable. Discovering economic costs and being able to measure them are necessary steps for more effective profit planning,cost control and often for sound pricing practises. Production analysis frequently proceeds in physical terms while cost analysis proceeds in monetary terms Production analysis mainly deals with different production functions and their managerial uses. Supply analysis deals with various aspects of supply of a commodity. Certain important aspects of supply are: Supply schedule, curves and function ,Law of supply and its limitations, Pricing is a very important area of Managerial Economics Price is the genesis of the revenue of a firm and as such the success of a business firm largely depends on the correctness of the price decisions taken by it. The important aspects dealt with under this area are : Price Determination in various Market Forms, Pricing Methods, Differential Pricing , and Price Forecasting. Business firms are generally organisedfor the purpose of making profits and, in the long run, profits provide the chief measure of success. If knowledge about the future were perfect, profit analysis would have been very easy task. Profit planning and measurement constitute the difficult area are: Nature and measurement of profit,Profit Policies and Techniques of profit planning like Break-Even Analysis The most complex and troublesome for the business manager are likely to those relating to the firm’s capital investments. Capital management implies planning and control of capital expenditure The main topics dealt with are : Cost of Capital, Rate of Return and Selection of projects. Business Economics and Micro- Economic theory Business Economics and Macro-Economic theory Business Economics and Mathematics Business Economics and Accounting Business Economics and Management Business Economics and Psychology 1) The scientific Method or Experimental Method- The blend of Inductive and Deductive method 2) The Statistical Method –is a device by which the quantitative data are collected and scientifically analyzed in order to give us a more clear picture of happenings. 3) The Method of Simulation- This method has acquired prominence with the oncoming of electronic computers. 4) The Description method- It is used by Managerial Economist to analyse the impact of original structure on the working of business enterprises 5) Reference to facts and figures of the firm provides complete information about the working of the firm. Systematically an approach can be set up to compile the data from the various departments of the firm. 6) Case studies undertaken would provide an invigorating method in the learning process in the science of Managerial Economics. Case studies bring out the complexity of the environment in which the managers have to take economic decisions 1) Wants- Want refers to lack of satisfaction, a state of discomfort which every individual desires to eliminate. 2) Utility- Utility is the capacity of a good to satisfy a human want. Total utility and Marginal Utility 3) Demand- Demand is the desire backed by purchasing power. 4) Supply- Supply of any commodity refers to various amounts of the commodity which the sellers are willing to sell at different possible prices at any given time. 5) Production- Production refers to creation of something tangible which can be used to satisfy human want. 6) Distribution- The term distribution refers to the sharing of the wealth produced in the community among the various factors of production 7) Consumption- Consumption implies destruction or use of utilities for satisfying human wants 8) Cost- Production involves cost. The aggregate of the expenditure incurred by the producer in the process of production is called as cost of production. 9) Price- The value of anything expressed in terms of money is the ‘price’ of that thing 10) Competition- 11) Monopoly- Monopoly is that market category in which there is single seller. 12)Profit- In economics we refer to profits as a reward which goes to the organization(entrepreneur) as a factor of production for its participation in the process of production. 13) Optimisation- Making the best possible use of available resources to obtain the maximum possible desired quality of output. 14) Average and Marginal – Marginal Cost is the additional cost for producing additional unit of output. 15) Elasticity- Elasticity means the degree of responsiveness of change in one variable brought about by change in some other variable. 16) Micro and Macro Economics -