Introduction to Managerial Economics

Economics affects our daily lives. Economic conditions affects businesses positively and/or negatively. Economics helps decision making.

Managerial Economics is the science that deals with the application of various economic theories, concepts, principles and techniques to business management in order to solve management and business problems.

Features :

1. Helps in decision making. Focuses on decision making process, models, variables and their relationship.
2. It is both conceptual and metric in nature.
3. Uses various economic variables like national income, inflation, deflation, trade cycles etc. to understand the business environment.
4. Gives importance to non-economic factors that affect the business like socio-political and cultural factors, technology etc.
5. Uses other related services like accounting, mathematics, statics etc to assist in decision making.

Note : It provides only the logic and methodology to arrive at solutions, no the ready-made solutions itself.

Scope :

• Objectives of a firm
• Demand Analysis & Forecasting
• Production & Cost Analysis
• Pricing decisions, policies and practices
• Profit Management
• Capital Management
• Linear programming and theory of games
• Market Structure & Conditions
• Strategic Planning
• External environment

The scope keeps growing with the growth of modern business and business environment.

Significance :

The main concern is to apply theories to find solutions to day-to-day problems faced by a business, not to study the theoretical economic concepts.

1. Provides guidance to identify key variables in decision making.
2. Helps understand various intricacies of business and managerial problems to make informed decisions.
3. Provides us the necessary skill and tools of analysis and techniques.
4. Helps become proactive and competent.

Functions of Managerial Economist :

• Decision Making
• Forward Planning