Managerial Economics: meaning, Nature, Significance

Managerial economics (meaning and nature)

Managerial economics is economics applied in decision making. It is the branch of economics which serves as a link between abstract theory and managerial practice.

It is based on the economic analysis for identifying problems,organizing information and evaluating alternatives.

DEFINITIONS OF MANAGERIAL ECONOMICS

―Managerial economics is the of economic modes of thought to analyse business situationǁ

-Mc.Nair and Meriam

―Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forwardplanning by the management.ǁ

NATURE OF MANAGERIAL ECONOMICS

1.     It is microeconomic in character as it concentrate only on the study of the firm not on the working of the economy

2.     It takes help from the macroeconomics to understand the environment in which the firm operates‘

3.    It is normative rather than positive i.e., it gives answer for the question what ought to be than what is ,was.

4.     It is both conceptual and metrical.

5.     It focuses mainly on the theory of the firm than on distribution‘

6.     Knowledge of managerial economics helps in making wise choices.i.e., choices among scarcity of resources.

7.     It is goal oriented i.e., aims at achievement of objectives.

SIGNIFICANCE OF MANAGERIAL ECONOMICS

1.     It helps in decision making

2.     Decisionmaking means a balance between simplification of analysis to be manageable and complication of factors in hand

3.     It helps the manager to become an more competent builder

4.     It helps in providing most of the concepts that are needed for the analysis of business problems,the concepts such as elasticity of demand ,fixed, variable cost, SR and LR costs, opportunity costs,NPV etc.,

5.     It helps in making decisions in the following.

What should be the product mix?

Which is the production technique?

What is the i/p mix at least cost?

What should be the level of output and price?

How to take investment decisions?

How much should the firm advertise