MB 0026 Set 1 Page 2
It is a science of decision making. It concentrates on decision makingprocess, decision models and decision variables and their relationships.7.
It is both conceptual and metrical and it helps the decision maker byproviding measurement of various economic variables and theirinterrelationships.8.
It uses various macro-economic concepts like national income, inflation,deflation, trade cycles etc to understand and adjust its policies to theenvironment in which the firm operates.9.
It also gives importance to the study of noneconomic variables havingimplications of economic performance of the firm.10.It uses the services of many other sister sciences like mathematics,statistics, engineering, accounting, operation research and psychology etcto find solutions to business and management problems.
Importance of the study of Managerial Economics
Managerial Economics does not give importance to the study of theoreticaleconomic concepts. Its main concern is to apply theories to find solutions to day–today practical problems faced by a firm.Significance of the study Managerial Economics1.
It gives guidance for identification of key variables in decision makingprocess.2.
It helps the business executives to understand the various intricacies of business and managerial problems and to take right decision at the righttime.3.
It provides the necessary conceptual, technical skills, toolbox of analysisand techniques of thinking and other such most modern tools andinstruments like elasticity of demand and supply, cost and revenue,income and expenditure, profit and volume of production etc to solvevarious business problems.4.
It is both a science and an art.5.
It helps the business executives to become much more responsive,realistic and competent to face the ever changing challenges in themodern business world.6.
It helps in the optimum use of scarce resources of a firm to maximize itsprofits.7.
It also helps in achieving other objectives a firm like attaining industryleadership, market share expansion and social responsibilities etc.8.
It helps a firm in forecasting the most important economic variables likedemand, supply, cost, revenue, price, sales and profit etc and formulatesound business polices.9.
It also helps in understanding the various external factors and forceswhich affect the decision making of a firm. Thus, it has become a highlyuseful and practical discipline in recent years to analyze and find solutionsto various kinds of problems in a systematic and rational manner.