MANAGERIAL

ECONOMICS
Dr. Poornima Narayan
The name of the discipline is Managerial Economics
• Hence important to understand ‘What is Economics?’.

‘oikos’ (house) and ‘nomos’ (custom or law)

• However, Economics is not confined to households,

equally relevant to larger contexts – of nations, the world
and business.
Our area of interest is BUSINESS and MANAGEMENT

Economics renders help in making decisions in the

following contexts:

PRODUCTION - What to produce, how much of a good

to produce and how to produce a given quantity of a good

DISTRIBUTION - Who is the target group of buyers for

each product, at what price?

CONSUMPTION - What and how much to buy and

consume?
Economic laws and tools of economic analysis now applied
in the process of business decision making.

This has led to the emergence of a separate branch of study

called MANAGERIAL ECONOMICS

Economic theories and techniques are applied to business

problems, evaluate business options, and opportunities with
a view to arriving at an appropriate business decision

Managerial economics is thus

Economic knowledge+ logic + theories and analytical tools  Rational decision making
Managerial Economics constitutes of

• Economic theories (Micro and Macro, Econometrics)

and
• Analytical tools (Variables, Slope, Optimisation,LP)

The combination, when applied to solving business

problems, helps in scientific decision making and
forward planning in business (of business firms and
hence applicable to industries)
Micro economic theories
• Theory of demand,
• Theory of supply
• Theory of production
• Theory of Markets …….

Macroeconomic theories
• Fiscal policy
• Monetary Policy
• Exchange rate policy
• Industrial policy …….
 Economic Analytical
tools(Variables, Slope,
theories (Micro/ LP, Optimisation tech,
Macro) Econometrics)
Managerial Economics is the amalgamation of economic theory
with business practices so as to ease decision-making and future
planning by management.

Managerial Economics can be defined as the

‘Integration of economic theory with business
practice for the purpose of facilitating decision
making and forward planning by the management.
Managerial Economics is the discipline which deals
with the application of economic theory to business
management.’

Managerial economics lies in the borderline between economics

and business management and serves as bridge between the two
disciplines.