Scope and nature of Managerial Economics: NATURE:
Manage Manageria riall Econom Economics ics,, by nature nature,, is a specia specializ lized ed discip disciplin linee of manage managemen mentt stud studie iess whic which h deal dealss with with the the appl applic icat atio ion n of econ econom omic ic theo theory ry,, tool toolss and and methodologies to business management practice.
Manage Manageria riall Econom Economics ics mainly mainly relies relies on the sound sound framew framework ork of tradit tradition ional al economics economics and decision decision sciences in analyzing analyzing the problems problems in a business. business. That mean meanss it main mainly ly reli relies es on the the appl applic icat atio ion n of econ econom omic ic prin princi cipl ples es and and methodologies for business decision making.
Managerial Economics is confined only to a part of business management, but it is not direct directly ly concer concerned ned with with the manager managerial ial proble problems ms involv involving ing contro control, l, implementation and other management strategies.
Manage Manageria riall econom economics ics is mainly mainly micro micro economi economics cs in nature nature,, because because micro micro economics deals with individual units or sections of an economy (like a person, a firm firm or grou group p of pers persons ons or firm firms) s).. As Manage Manageri rial al Econ Econom omic icss is mainly mainly concer concerned ned with with analyz analyzing ing and findin finding g soluti solutions ons to the proble problems ms of decisio decision n 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’. 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 be”. People who earn high incomes ought to pay more taxes is an example of normative economics.
Manage Manageria riall Econom Economics ics uses some some theori theories es of Macro Macro Econom Economics ics also. also. An organization is affected by many outside factors of the environment in which it work workss and and in orde orderr to overc overcom omee thes thesee prob proble lems ms,, some some theo theori ries es of Macr Macro o Econ Econom omic icss are are used used in Mana Manage geri rial al Econ Econom omic ics, s, as fact factor orss rela relate ted d to the 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
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DECISION SCIENCES
Managerial Economics
Solutions to business problems
SCOPE: 1. Framing Framing objecti objectives ves of a business business firm or organiza organization tion 2. Effective Effective allocati allocation on of resources resources,, aiming aiming at achieving achieving high output output through through low and proper allocation of resources. 3. Demand Demand analys analysis is and Foreca Forecasti sting ng 4. Facilitate Facilitatess a firm firm to withstand withstand in a competit competitive ive situatio situation. n. 5. Stra Strate tegi gicc plann plannin ing g 6. Prod Produc ucti tion on Manag Managem emen ent, t, like like plann plannin ing g the the busin busines esss sched schedul ule, e, regul regulat atin ing g the the production process and placing the product in the market etc. 7. Cost analysi analysiss with various various cost cost concepts concepts and cost cost curves, curves, determines determines cost-out cost-output put relationship both in short-run and long run. 8. Pric Pricin ing g stra strate tegi gies es 9. Market Market Structu Structure re analysis analysis for taking taking necessa necessary ry decision decisionss that that are requir required ed for a firm to exist in the market. 10. The concept of Opportunity Opportunity Cost provided provided by Managerial Managerial Economics Economics facilitates facilitates Investment and Capital Budgeting Decisions 11. Mark Market etin ing g stra strate tegi gies es like like Prod Product uct Poli Policy cy,, Sale Saless Prom Promot otio ion, n, Segm Segmen enta tati tion, on, Targeting and Positioning of Products 12. Economies of scale for enjoying enjoying economies and diseconomies of scale scale for a firm. 13. Profit Management like profit estimation estimation and profit planning. 14. With the concept of production function function it analyzes input and output relationship. 15. Effective Effective Inventory Inventory Control Control
