UNIT – IDefinition of Managerial Economics
Managerial economics refers to those aspects of economics and its tools of analysis most relevant to thefirm’s decision-making process. According to MeNair and Meriam, managerial economies consists of the use of economic models of thought to analyze business situations. Some writers consider managerial economics as theintegration of economic theory with business practice for the purpose of facilitating decision-making and forwardplanning by management. The underlying idea of all these definitions is that managerial economics means economicsapplied in decision-making. So we may consider managerial economics as a special branch of economics bridgingthe gap between abstract theory and managerial practice.It may be pointed out here that effective decision-making at the firms’ level calls for a careful analysis of achoice between alternative courses of action. Economic theory offers a variety of concepts and analytical tools whichcan be of considerable assistance to the manager in his decision-making process. In fact actual problem-solving mayrequire many skills and tools which are not available in the traditional economist’s. For example, knowledge of accounting and of statistical concepts and methods, which are not taught in economics, can help the analyses toapply more effectively the economic tools in a concrete situation. The problems of industrial management do notneatly fall into one academic discipline or another. Rather they tend to out across different disciplines.Managerial economics is pragmatic, it is concerned with analytical tools that are useful, that have proventhemselves in practice, or that promise to improve decision – making in the future. In the attempt to be practical it cutsthrough many of the refinements of theory.Managerial economies differs from other discipline in the field of economics in two important respects. First, itis that portion of economics which has to do specifically with managerial decision making. Therefore, it makes aselection from among all the theoretical tools available and those that are directly applicable, empirically based, andthus testable. These qualifications do not mean that these tools are either easier to work with or to comprehend or that they do not require atleast as high an order of economic know-how as the rest of economics.
SCOPE OF MANAGERICAL ECONOMIC
Haynes and others point out that y definition the scope of managerial economics does not extend to macroeconomic theory and the economics of public policy an understanding of which is who essential for the manager. Thisis because there is an important link between the two in so far as the decision at the firm level must take into accountthe trends in the economy and the impact of a host of environmental factors. Hence in our decision we extend itsscope to macro economic theory also.
RELATIONS TO OTHER BRANCHES OF LEARNING
The simplest way to calrify the scope of field of study is to discuss its relation to other subjects. In thisconnection it is easy to see that managerial economics has close connection with economics, the theory of decision-making, operation research, statistics and accounting. The fully trained managerial economist integrates conceptsand methods form all of these disciplines, bringing them together to bear on managerial problems.
MANAGERIAL ECONOMICS AND ECONOMICS
Managerial economics has been defined as economics applied in decision-making. It is a special branch of economics bridging the gap between abstract economic theory and managerial practice. The primary source of concepts and analytical tools for managerial economics in micro-economic theory or what is popularly termed asMarshallian economics concepts such as the elasticity of demand, marginal cost, the short and long runs, marketstructures, etc. are all of great significance to managerial economics. Well-known model in price theory such as themodels for the monopoly price, the kinked demand theory and the models of price discrimination are also made use of in managerial economics. Macro-economics aids managerial economics in the area of forecasting. Post-Keynesiantheory of income and employment has direct implications for forecasting general business conditions. Since theprospects of an individual firm often depend greatly on business in general, individual firm forecasts depend ongeneral business forecasts, which make use of models derived from theory.A survey conducted in the United Kingdom showed that business economists have found economic concepts