You are on page 1of 4

ECONOMICS: Economics is a social science .

Its basic function is to study how people individual house holds, firms and nations maximizing their gains from their limited resources and opportunities. In economic terminology it is called as maximizing behaviour or more approximately optimizing behaviour . Optimization means selecting best out of available resources with the objective of maximizing gains from given resources. Economics is thus 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. The origin of the subject could be traced from the works of the Greek philosopher Aristotle who confined the study of economics to household management and acquiring, guarding and making proper use of wealth. The term economics is derived from two Greek words OIKOS(a house) and NEMEIN(to manage). Prof. Samuleson remarks economics as the oldest of arts and newest of science, indeed the queen of the social science. Management : Management is the discipline of organizing and allocating a firms scarce resources to achieve its desired objectives. Managerial Economics: 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. Douglas : 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. Mansfield : He defines that managerial economics is concerned with the application of economic concepts and economic tools to the problems of formulating rational decision making. Spencer and Seigleman : It is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management

Economics theory

Business Management Decision Problems

Managerial EconomicsApplication of Economics to solving business problems Optimal Solutions to Business problems

Micro Economic Theory

Macro Economic Theory

Business Management Decision Problems

Managerial EconomicsApplication of Economics to solving business problems

Optimal Solutions to Business problems

Economic Theory and Managerial Theory

Economic Theory and Managerial Theory


Economic Theory
Managerial Theory

It deals with the body principles It has the characteristics of both micro and macro economics It deals with a study of individual firm and individual consumer It based on certain assumptions It studies economic aspects of the problem

It deals with the application of certain principles to solve the problem of a firm It has only micro characteristics It deals with the study of only profit theories In managerial theory assumptions disappear due to practical situations It studies both economic and non-economic concepts.

Scope of Managerial Economics

Economics has two major branches 1. Micro Economics 2. Macro Economics The term Micro means small and Macro means big. Both are applied to business directly or indirectly. managerial economics comprises both micro and macro economic theories. The parts of micro and macro economics that constitut managerial economics depend on the purpose of analysis. Micro Economics Microeconomics is the study of individual consumers and producers in specific markets. Supply and demand Pricing of output Production processes Cost structure Distribution of income and output