Economics is a social science that studies individuals' economic behavior, economic phenomena, as well as how individual agents, such

as consumers, firms, and government agencies, make trade-off choices that allocate limited resources among competing uses.

Introduction to Managerial Economics

Learning Objectives Define managerial economics and introduce students to the typical issues encountered in the field. Discuss the scope and methodology of managerial economics.

Managerial Economics
Managerial Economics can be defined as application of economic theory with business practices so as to make decision-making and future planning. Managerial Economics helps in formulating logical managerial decisions. Managerial Economics is a science dealing with effective use of scarce resources. It guides the managers in taking decisions relating to the firms customers, competitors, suppliers as well as relating to the internal functioning of a firm.

 Managerial Economics ----

Applies economic tools and techniques to business and administrative decision making.

Managerial Economics Is a Tool for Improving Management Decision Making

 To establish appropriate decision rules, managers must understand the economic environment in which they operate.

 Managerial Decisions
Product Selection, Output, and Pricing Internet Strategy Organization Design Product Development and Promotion Strategy Worker Hiring and Training Investment and Financing

Economic Concepts

Marginal Analysis Theory of Consumer Demand Theory of the Firm Industrial Organization and Firm Behavior Public Choice Theory

Quantitative Methods

Numerical Analysis Statistical Estimation Forecasting Procedures Game Theory Concepts Optimization Techniques Information Systems

What is Managerial Economics

Use of Economic Concepts and Quantitative Methods, To Solve Management Decision Problems

Management Decision Problems

Economic Concepts

Quantitative Methods

Managerial Economics For Optimal Solutions to Management Decision Problems

 Managerial Economics makes use of statistical and analytical tools to assess economic theories in solving practical business problems. Study of Managerial Economics helps in enhancement of analytical skills, assists in rational configuration as well as solution of problems. The use of Managerial Economics is not limited to profit-making firms and organizations. Managerial Economics is associated with the economic theory which constitutes Theory of Firm. Theory of firm states that the primary aim of the firm is to maximize wealth.

 Decision making in managerial economics generally involves establishment of firms objectives, identification of problems involved in achievement of those objectives, development of various alternative solutions, selection of best alternative and finally implementation of the decision. Managerial Economics deals with allocating the scarce resources in a manner that minimizes the cost. Managerial Economics is different from microeconomics and macro-economics. Managerial Economics has a more narrow scope - it is actually solving managerial issues using micro-economics.

 The first question relates to what goods and services should be produced and in what amount/quantities. The second question relates to how to produce goods and services. The firm has now to choose among different alternative techniques of production. It has to make decision regarding purchase of raw materials, capital equipments, manpower, etc. The third question is regarding who should consume and claim the goods and services produced by the firm.

 Managerial Economics deals with key issues such as what conditions favor entry and exit of firms in market, why are people paid well in some jobs and not so well in other jobs, etc. Managerial Economics is a great rational and analytical tool. Managerial economics has applications in both profit and not-for-profit sectors. The model of business is called the theory of the firm. In its simplest version, the firm is thought to have profit maximization as its primary goal.

 At its simplest level, a business enterprise represents a series of contractual relationships that specify the rights and responsibilities of various parties. People directly involved include customers, stockholders, management, employees, and suppliers. Society is also involved because businesses use scarce resources, pay taxes, provide employment opportunities, and produce much of societys material and services output. Firms are a useful device for producing and distributing goods and services. They are economic entities and are best analyzed in the context of an economic model.

 The economist also defines profit as the excess of revenues over costs. Managerial economics is the science of directing scarce resources to manage cost effectively. It consists of three branches: competitive markets, market power, and imperfect markets. A market consists of buyers and sellers that communicate with each other for voluntary exchange. Whether a market is local or global, the same managerial economics apply.