Managerial economics is sometimes referred
Cost Analysis- helps the managers
to as business economics.
Managerial economics is the application of
various economic measures, policies,
principles, tools, methods, and theories to
enable decision-making and problem-solving.
It highlights techniques for efficient
utilization of financial, human, and material
resources—so that profits can be maximized.
A branch of economics that applies
microeconomic analysis to decision
methods of businesses or other management
units to assist managers to make a wide
array of multifaceted decisions.
The basic objective of managerial
economics is to analyze economic problems
of business and suggest solutions and help
the managers in decision-making.
Understanding the principle of managerial
economics is essential for effective
management and sustainable growth.
Managers face number of choices; they
need to allocate resources wisely, determine
pricing strategies, forecast demand, analyze
market trends, and assess risks.
Managerial economics is a discipline that
combines economic theory with practical
business knowledge.
It provides a framework for decision
making by applying economic concepts and
tools to real word business problems. By
utilizing this principle managers can
optimize their decision-making process and
improve the overall performance of their
organization.
Managerial economics can be defined as
the branch of economics which deals with the
application of various concepts, theories, and
methodologies of economics to solve
practical problems in business management.
Key concepts of Managerial Economics
1. Supply and Demand analysis- to
determine optimal production levels
and pricing strategies.
2.
assess production cost, identify cost
drivers, and make informed decision
about resources allocation.
3. Pricing strategies- setting the right
price is a critical decision for
businesses. Managerial Economics
helps determine optimal pricing
strategies by considering costs,
competition, and consumer behavior.
4. Market structures- understanding
market structures such as perfect
competition, monopolistic competition,
and oligopoly, etc. enables managers
to navigate the competitive landscape
effectively.
5. Risk Analysis- business decision
involving inherent risk and
uncertainties. Managerial economics
equips managers with tools to assess
risks, make informed judgements, and
develop contingency plans.
Economic principle that managers should
keep in mind:
1. The Incremental Principle- The
decision is sound if it increases
revenue more than cost or if it reduces
cost more than revenue.
2. The principle of time perspective- A
decision should take into account both
the short run and long run effects on
revenue and cost, giving appropriate
wight to the most relevant time period
in each individual decision.
3. The discounting principle- if the
decision affects cost and revenue at
the future dates it is necessary to
discount these costs and revenue to
present values before valid
comparison of alternatives as possible.
Nature of Managerial Economics
 Managerial Economics can be termed
as a science in the sense that it fulfills
the criteria of being a science.
 Managerial economics is the science
of making decision and finding
alternatives keeping the scarcity of
resources in mind. Policies are formed
after constant testing and trailing.
 In science principles are universally
acceptable and in managerial
economics policies are universally
applicable.