Mrs. N.

Emergence of managerial economics as a separate

course of management studies can be attributed to
at least three factors
Growing complexity of business decision making
process due to changing market conditions and
business environment.
The increasing use of economic logic, conceptual
theories and tools of economic analysis in the process
of business decision making process.
Rapid increase in demand for professionally trained
managerial manpower.

Economics is a social science, which studies
human behaviour in relation to optimizing
allocation of available resources to achieve
the given goals.
Eg : individual household behaviour, firm,
industry and nation.

Economics is also a study of choice-making
behaviour of the people.


Managerial economics can be broadly defined
as the study of economic theories, logic and
tools of economic analysis that are used in
the process of decision making. Economic
theories and techniques of economic analysis
are applied to analyze business problems,
evaluate business options and opportunities
with a view to arriving at an appropriate
business decision.


Managerial economics is concerned with the
application of economic principles and
methodologies to the decision making
process within the firm or organization.
It seeks to establish rules and principles to
facilitate the attainment of the desired
economic goals of the management.
- Douglas

The study of allocation of the limited
resources available to a firm or other unit of
management among the various possible
activities of that unit. Henry and Haynes

Integration of economic theory and
methodology with analytical tools for
applications to decision-making about the
allocation of scarce resources in public and
private institution. Seo and Winger
Application of principles of Economics to solve
managerial problems.
Utilisation of resources in a goal oriented manner.
Analysis of problems of decisions making.
Facilitating forward planning.
Analysis and decisions upon the economic issues
underlying the choice and allocation of resources.
Bridge between traditional economics and Business
Management .


Art or Science Both
Micro Economics
Operates against the backdrop of Macro economics
Normative
Prescriptive actions
Applied in nature/Pragmatic
Offers scope to evaluate each alternative
Interdisciplinary
Decisions relating in Partial Equilibrium
Assumptions and limitations


Demand Analysis
Cost Analysis
Production analysis
Pricing Practices and Policies
Profit Management
Capital Management
Investment decisions
Allied Disciplines


Basis of Business Policies
Predicting Economic Quantities
Estimating Economics relationship
Helpful in Understanding the External forces
constituting the environment.
Reconciling theoretical concepts of
economics in relation to the actual business
behavior and conditions.


To make reasonable profits on capital
employed.
Successful forecasts
Knowledge of sources of Economic
Information
His status in the firm

Demand estimation and forecasting
Preparation of business /sales
forecasts
Analysis of market survey to
determine the nature and extent of
competition
Analyzing the issues and problems
of concerned industry

Assisting the business planning process of
the firm.
Discovering new possible fields of
business endeavor and its cost-benefit
analysis.
Advising on prices, investment and capital
budgeting policies .
Evaluation of capital budgeting etc.

Decision making
areas
Demand
Decision
Production
planning
and cost,
revenue
decision
Investment
decision
Economic
Forecasting
and
Forward
Planning
Study of
Economic
Environment
Pricing
and
related
decisions
Managerial Economics
Economics
Operations Research
Statistics
Accountancy
Mathematics
Psychology
Organisational Behaviour