INTRODUCTION TO MANAGERIAL ECONOMICS

Meaning and Definition Nature Scope & Subject- Matter Significance Role of Managerial Economist

Meaning of Managerial Economics

In simplest of sense Managerial economics is: Application of economic theory in business decision making. It deals with the use of economic concepts, tools and methods in managerial decision making.

Managerial Economics

Definitions:
Haynes, Mote and PaulManagerial Economics is economics applied in decision making. It is a special branch of economics bridging the gap between abstract theory and managerial practice. Spencer and Seegelman Business Economics (Managerial Economics) is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.

MansfieldManagerial economics is concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision.

Nature Of Managerial Economics

Managerial Economics is science of decision making concerned with finding and implementing of the solution to managerial problems. It is Normative in approach, It deals with prescription what a firm should do and how it should achieve it. Positive science is descriptive in nature it deals with what is, what was and what will be. Managerial economics is not positive in its approach. Managerial economics is more Pragmatic

ME with MICRO & MACRO

Managerial Economics is basically a blend of Economics and Management. Two branches of economics i.e. micro economics and macro economics are the major contributors to managerial economics. Managerial Economics and Micro Economics Micro Economics is a broader concept as compare to Managerial Economics. Micro Economics forms the foundation of managerial economics. Almost all the concepts of Managerial Economics are the perceptions of Micro Economics concepts. Managerial economics can be perceived as an applied Micro Economics.

Managerial Economics and Macro Economics All the firms operating in the market have to take under consideration the constituent of the economic environment in which they operate for its proper functioning. This economic environment is nothing but the Macro economics elements.

Subject Matter and Scope

***Managerial economics also draws together and relates ideas from various functional areas of management like production, marketing, finance and accounting.***

Managerial economics performs two major functions: 1) Decision making, and 2) Forward Planning
Contd..

1) 2) 3) 4) 5) 6)

And this functions are to be performed under uncertainty, for this the following subject matter s are covered under its study: Demand and Supply Analysis Production and Cost Market Structures Price and Output Decision Profit Analysis Basics of Macro economics , etc

Role of Managerial Economist:

A managerial economist helps the management by using his analytical skills and highly developed techniques in solving complex issues of successful decision-making and future advanced planning. The role of managerial economist can be summarized as follows: He studies the economic patterns at macro-level and analysis its significance to the specific firm he is working in. He has to consistently examine the probabilities of transforming an ever-changing economic environment into profitable business avenues. He assists the business planning process of a firm. He also carries cost-benefit analysis.

1) 2) 3)

He has to undertake certain specific functions such as: Demand forecasting Cost and pricing decision Economic analysis of industry

Significance of managerial Economics

Price and Output Decisions Demand Estimation Choice of a Technique of Production Advertising Decision Long Run Production decision Investment Decision