The managerial economics integrates concepts and methods from these disciplines and bringing them to bear on managerial problems. Managers are thus engaged in a continuous process of decision making through an uncertain future and the overall problem confronting them is one of adjusting to uncertainty. Industry and Trade Policies of Govt. Definition: Managerial economists have defined managerial economics in a variety of ways: According to E. Wherever there are scarce resources, managerial economics ensures that managers make effective and efficient decisions concerning customers, suppliers, competitors as well as within an organization. As many as 16 recordedlosses in 1995-96.
In managerial economics, one attempts to extract from economic theory particularly micro-economics those concepts and techniques that enable the decision-maker to efficiently allocate the resources of the organization. So it is considered to be an ideal combination of art and science. In such a dynamic environment, a business firm has to take various strategic decisions and this, in turn, necessitates the integration of managerial economics into the business environment. Business executives should take personnel decisions as an essential element. Managerial economics, sometimes referred to as business economics, is a relatively new area of economic analysis and has become more widespread in the past few decades.
In recent years, there is a trend towards integration of managerial economics and Operation Research. However, these terms are not necessarily accepted by courts in the same way as they are defined in traditional economics. Elasticity of supply and Factors influencing supply. The statistical method of drawing inference is mathematical in nature. .
But in order to be objective, the approach must be based on relevant, adequate and reliable data. This function is being done by managerial economics. Corporate Managerial Economic Decisions : There are at least eight different types of decisions with which business economists are likely to be associated in a typical company. There are several areas which have attracted the attention of the managerial economist, such as maximising profit, reducing stocks, forecasting sales, etc. Goods are bought and sold for cash as well as credit. The functions of a managerial economist can be broadly defined as the study and interpretation of economic data in the light of the problems of the management.
In our country India too, big industrial houses have come to recognize the need for managerial economists, and there are frequent advertisements for such positions. Capital Management Capital is the life of the modern business. Because sales revenue and profits of the firm and industry are affected by the macroeconomic environment, managerial economics must relate the concept of macroeconomics to the problems of the business firm. Managerial economics focuses attention on these social obligations as constraints subject to which business decisions are to be taken. Economic theory and theory of decision making appear to be in conflict, each based on different set of assumptions. Briefly, capital management implies planning and trolls of capital expenditure.
The nature of the assumptions and benefits, 3. For instance, the goal or the mission of a hospital would be to treat as many patients as possible, subject to the condition that its standard of performance quality of medical care does not fall. The accounting techniques are very essential for the success of the firm because profit maximisation is the major objective of the firm. The experimental method may be usefully applied to those aspects of managerial behaviour which call for accurate and logical thinking. Management Economics teaches us that any business is required to make proper management to move forward. What phase of trade cycle is going to occur in the near future? The primary goal of a manufacturing firm is to maximize its total profit.
In order to decide the amount of goods and services to be produced, the managers use methods of demand forecasting. Nothing will build management confidence in a managerial economist more quickly and thoroughly than a record of successful forecasts, well-documented in advance and modestly evaluated when the actual results become available. In other cases, an apparent failure does nobody any harm. Decision making is both a managerial function and an organisational process. A similar change is happening all over the world, including in China. The knowledge of the pricing of a product under conditions of oligopoly is also essential. The economy is the institutional structure through which individuals and firms in a society coordinate their desires.
Some writers have ventured to call it applied microeconomics or price theory in the service of business executives. These relate to social and political environment in which a business and industrial firm has to operate. Thus, Like we told someone to do this work and how much you can do that work. Secondly, it also incorporates useful ideas from other disciplines such a psychology, sociology, etc. For, it is well-known that if management does not understand, it will almost automatically reject. Business decisions about the future require the businessmen to choose among alternatives, and to do this, it is necessary to know the costs involved. Secondly, he must establish and maintain many contacts with individuals and data sources, which would not be immediately available to the other members of the management.
Now let us discuss Nature and scope of managerial economics in detail. Managerial Economics and Mathematics : Mathematics is yet another important subject closely related to managerial economics. The stress is on applied economic analysis. The firm, for instance, must decide which is its niche market-domestic or foreign? It deals with the use of economic concepts and principles of business decision making. The micro-economic analysis may be undertaken at three levels: i The equalisation of individual consumers and produces; ii The equalization of the single market; iii The simultaneous equilibrium of all markets.
Measurement of the Efficiency of the Firm Managerial Economics provides useful tools for managers in measuring the efficiency of the business firm. Economic theory is based on certain assumptions. It has come to be realized that business part from its obligations to shareholders has certain social obligations. Managerial Economics and Economic Theory Traditional Economics : Economics has two major branches: microeconomics and macroeconomics. On examining this matter, managerial economics seems like science, because it also has rules and principles.