Principles of Economics and Management

Economics Economics is that social science which studies the behaviour of human beings in relation to the production and consumption of goods for the satisfaction of human wants. Economics studies economic behaviour of not only individual but also of numerous institutions engaged in economic activities. Economics attempts to solve economic problems.

Economic Problem
Economic problem arises because of human wants are unlimited whereas the means or resources to satisfy these wants are scare. Economic problem is a problem of choice which arises due to multiplicity of wants and scarcity of resources. Economics is therefore, generally defined as a science dealing with allocation of scare resources among the competing and numerous wants of human being.

Economic Problems
Economic problems arises due to 1. Unlimited wants 2. Scarcity of resources 3. Resources have alternative uses 4. Wants are gradable

Managerial Economics
Managerial Economics is a science that deals with the application of various economic theories, Principles, concepts and techniques to business management in order to solve business management problems. It deals with practical application of economic theory and methodology to decision making problems faced by private, public and non-profit making organisations.

Definitions
Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by the management Spencer and Seigelman. Managerial Economics is the use of economic modes of thought to analyse business situation Mc Nair and Meriam. The application of economic theory and methodology to business administration practice Brighman and Pappas. Use of economic analysis in formulating business and management policies is known as managerial economics Joel dean.

Features of Managerial Economics

1. 2. 3. 4. 5. Realistic, Pragmatic Science of decision-making Conceptual and metrical Uses various macro economic concepts Gives importance to the study of noneconomic variables 6. Uses the services of many other sister sciences

Scope of Managerial Economics

1. Objectives of a Firm 2. Demand Analysis and Forecasting 3. Production and Cost Analysis 4. Pricing Decisions, Policies and Practices 5. Profit Management 6. Capital Management 7. Linear Programming and the Theory of Games 8. Market Structure and Conditions 9. Strategic Planning 10.Other Areas

Importance of the Study of Managerial Economics

1. Gives guidance for identification of key variables in decision-making process. 2. Helps the business executives to understand the various intricacies of business and managerial problems to take right decision at right time. 3. Provides the necessary conceptual, technical skills, toolbox of analysis and techniques. 4. It is both a science and an art. It helps in identifying various business and managerial problems.
5. Helps the business executives to become much more responsive, realistic and competent to face the changing challenges.

Importance of the Study of Managerial Economics Contd ..

6. Helps in the optimum use of scare resources of a firm to maximize its profits 7. Helps in achieving other objectives like attaining industry leadership, market share etc 8. Helps a firm forecasting the most important economic variables like demand, supply, cost, revenue, price, sales and profit etc. 9. Helps in understanding the various external factors and forces which affect the decision making.

Managerial Economist Role and Responsibilities

A Managerial economist can play a very important role by assisting the management in using the increasingly specialized skills and sophisticated techniques which are required to solve the difficult problems of successful decision-making and forward planning.

Role of Managerial Economist

1. Decision Making 2. Forward Planning a. b. c. d. e. Environmental Studies Business Operations Specific Functions Economic Intelligence Participating in Public Debates

Responsibility of Managerial Economist

1. He has to alert management in case he discovers an error in his forecast. 2. Must establish and maintain many contacts with individuals and data sources which would not be immediately available to the other members of the management.