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INTRODUCTION TO

MANAGERIAL

ECONOMICS

Meaning and Definition

Nature Scope & Subject- Matter

Significance

Role of Managerial Economist

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Meaning of Managerial

Economics

In simplest of sense

Manager ial econom ics is:

Application of economic theory in

business decision making.

It deals with the use of economic

concepts, tools and methods in managerialdecision making.

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Managerial Economics

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Definitions:

Haynes, Mote and Paul-

Managerial Economics is economics applied indecision making. It is a special branch of

economics bridging the gap between abstracttheory and managerial practice.

Spencerand Seegelman -

Business Economics (Managerial Economics)

is the integration of economic theory withbusiness practice for the purpose of facilitatingdecision making and forward planning bymanagement.

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Mansfield-

Managerial economics is concerned with

application of economic concepts and

economic analysis to the problems offormulating rational managerial decision.

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Nature Of Managerial

Economics

Managerial Economics is science of decisionmaking concerned with finding andimplementing of the solution to managerialproblems.

It is Normat ive in approach, It deals withprescription what a firm should do and how itshould achieve it.

Positive science is descriptive in nature itdeals with what is, what was and what will be.Managerial economics is not positive in itsapproach.

Managerial economics is more Pragmatic

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ME with MICRO & MACRO

Managerial Economics is basically a blend ofEconomics and Management. Two branches ofeconomics i.e. micro economics and macroeconomics are the major contributors to

managerial economics.Managerial Economics and Micro Economics

Micro Economics is a broader concept ascompare to Managerial Economics. Micro

Economics forms the foundation of managerialeconomics. Almost all the concepts of ManagerialEconomics are the perceptions of MicroEconomics concepts.

Manager ial econom ics can be perceived as an

appl ied Micro Econom ics.

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Managerial Economics and Macro Economics

All the firms operating in the market have to

take under consideration the constituent of theeconomic environment in which they operate

for its proper functioning. This economic

environment is nothing but the Macro

economics elements.

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Subject Matter and Scope

***Managerial economics also drawstogether and relates ideas from variousfunctional areas of management likeproduction, marketing, finance and

accounting.***

Managerial economics performs two majorfunctions:

1) Decision making, and2) Forward Planning

Contd..

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And this functions are to be performedunder uncertainty, for this the followingsubject matter s are covered under its

study:1) Demand and Supply Analysis

2) Production and Cost

3) Market Structures

4) Price and Output Decision

5) Profit Analysis

6) Basics of Macro economics , etc

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Role of Managerial

Economist:A managerial economist helps the management byusing his analytical skills and highly developedtechniques in solving complex issues of successfuldecision-making and future advanced planning.

The role of managerial economist can be summarizedas follows:

He studies the economic patterns at macro-level andanalysis its significance to the specific firm he is workingin.

He has to consistently examine the probabilities oftransforming an ever-changing economic environmentinto profitable business avenues.

He assists the business planning process of a firm.

He also carries cost-benefit analysis.

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He has to undertake certain specific

functions such as:

1) Demand forecasting

2) Cost and pricing decision

3) Economic analysis of industry

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Significance of managerial

Economics

Price and Output Decisions

Demand Estimation

Choice of a Technique of Production

Advertising Decision

Long Run Production decision

Investment Decision