Scope and nature of Managerial Economics: NATURE: Managerial Economics, by nature, is a specialized discipline of management studies which deals
s with the application of economic theory, tools and methodologies to business management practice. Managerial Economics mainly relies on the sound framework of traditional economics and decision sciences in analyzing the problems in a business. That means it mainly relies on the application of economic principles and methodologies for business decision making. Managerial Economics is confined only to a part of business management, but it is not directly concerned with the managerial problems involving control, implementation and other management strategies. Managerial economics is mainly micro economics in nature, because micro economics deals with individual units or sections of an economy (like a person, a firm or group of persons or firms). As Managerial Economics is mainly concerned with analyzing and finding solutions to the problems of decision making in a business firm, it is essentially micro economic in nature. Managerial economics is pragmatic, i.e. it is a practical subject. It prevents the abstract issues of economic theory. Managerial Economics falls into normative economics. Economics are two types: Positive and Normative economics. Positive economics is observed economic phenomenon like what is. Poverty in India is very high is an example of positive economics. Normative economics is it differentiates the actual from ideal like what ought to be. People who earn high incomes ought to pay more taxes is an example of normative economics. Managerial Economics uses some theories of Macro Economics also. An organization is affected by many outside factors of the environment in which it works and in order to overcome these problems, some theories of Macro Economics are used in Managerial Economics, as factors related to the environment comes under Macro Economics. Managerial Economics is goal-oriented and problem solving in nature, by using economic theory and decision sciences in solving business oriented problems. Managerial Economics converts theoretical framework of economics into real business practice.
ECONOMIC THEORY
DECISION SCIENCES
Managerial Economics
Solutions to business problems SCOPE: 1. Framing objectives of a business firm or organization 2. Effective allocation of resources, aiming at achieving high output through low and proper allocation of resources. 3. Demand analysis and Forecasting 4. Facilitates a firm to withstand in a competitive situation. 5. Strategic planning 6. Production Management, like planning the business schedule, regulating the production process and placing the product in the market etc. 7. Cost analysis with various cost concepts and cost curves, determines cost-output relationship both in short-run and long run. 8. Pricing strategies 9. Market Structure analysis for taking necessary decisions that are required for a firm to exist in the market. 10. The concept of Opportunity Cost provided by Managerial Economics facilitates Investment and Capital Budgeting Decisions 11. Marketing strategies like Product Policy, Sales Promotion, Segmentation, Targeting and Positioning of Products 12. Economies of scale for enjoying economies and diseconomies of scale for a firm. 13. Profit Management like profit estimation and profit planning. 14. With the concept of production function it analyzes input and output relationship. 15. Effective Inventory Control
