Features of Managerial Economics 1. These are essential to comprehending the circumstances and environments that envelop the working conditions of an individual firm or an industry. Being able to compete and stay in business requires an understanding of the dynamics of your market, competitors and customers. The theory of games holds out the hope of solving certain problems concerning oligopolistic interminacy. Manag … erial economics is a study of application of managerial skills in economics,more over it help to find problems or obstacles in the business and provide solution for those problems. It also goes deeper into such aspects as motives of holding inventory, cost of holding inventory, inventory control, and main methods of inventory control and management. It examines the interrelations among the various aggregates, and causes of fluctuations in them.
While considering the scope of managerial economics we have to understand whether it is positive economics or normative economics. He should be held in the confidence of the management. Thus, situational comparability is an essential element of this method. Accurate estimation of demand, by analysing the forces acting on demand of the product produced by the firm, forms the vital issue in taking effective decision at the firm level. To some extent, the descriptive method is also concerned with the interpretation of data.
Theory of Demand helps in developing an understanding between Price and quantity demanded. So it comes under microeconomics. Managerial Economics has components of micro economics Managers study and manage the internal environment of the organization and work for the profitable and long-term functioning of the organization. When demand is estimated, the manager does not stop at the stage of assessing the current demand but estimates future demand as well. The capstone for the specialization will provide a learning experience that examines the global economic environment of business. The most efficient level of operation of a certain plant may be at 1000 units per day where cost of production is lowest.
Implicit cost, however, is unpaid. A businessman has to take mainly two different but interrelated decisions in marketing. In addition to non-profit business organisations, government agencies and other non-profit organisations can exploit the techniques of managerial decision making to achieve goals in the most efficient manner. However, in managerial economics, managerial issues are resolved daily and difficult issues of economic theory are kept at bay. The managerial economist often needs focused studies of specific problems and opportunities. Thus, its scope is narrower than that of pure economic theory. Her teaching interests are mainly in operations process management, including product development and design, operation and technology strategy, and project management.
But that too is an unrealistic assumption. This method has gained popularity with the development of electronic computers, calculators and other similar equipment and internet services. In addition, it also seeks to apply profit theory, which forms part of distribution theories in economics. Economic theory suitably ignores the variety of backgrounds and training found in individual firms but managerial economics considers the particular environment of decision-making. Economic Theory and Managerial Theory : Economic Theory is a system of inter-relationships. Pragmatic Business economics is more pragmatic than traditional economics. If the firm is part of an oligopoly, i.
Managerial economics tries to find out the cause and effect relationship by factual study and logical reasoning. Therefore, it is a tool of practical utility, not a principle. Issues of Macro-economics whose knowledge is necessary for the successful management of a firm or an industry are : Business cycles, Taxation policies, Industrial Policy of the government, Price and distribution policies, Wage policies and anti- monopoly policies etc. Economic theory has the characteristics of both micro and macro economics. They are affected by the external environment of the economy in which it operates such as government policies, general price level, income and employment levels in the economy, stage of business cycle in which economy is operating, exchange rate, balance of payment, general expenditure, saving and investment patterns of the consumers, market conditions etc. It's not a general problem being solved; it's often a real-world problem of a real firm: for example, what combination of products at what price and what level of production would maximize the profits of a specific firm.
How many players are competing for the given market demand? Therefore, business manager must know the external forces working over his business environment. The most important obligations of a managerial economist is that his objective must coincide with that of the business. Economic theory is based on certain assumptions. Managers must balance the marginal cost of labor with the incremental revenues received from product expansions or introductions of new products. The managerial economist is usually assigned the task of preparing short term general economic and specific market forecasts to provide a framework for the development of sales and profit.
The positive science states the propositions without commenting upon what should be done. It is sophisticated for these reasons that now currently its use in mathematical concepts and scientific instruments. Thus we see that a firm has uncertainties to rock on with. These are essential to comprehending the circumstances and environments that envelop the working conditions of an individual firm or an industry. The problems of the business world attracted the attentions of the academicians from 1950 onwards. Answer to these and similar questions will throw more light on the perspective business and these questions present some of the areas where a managerial economist can make effective contributions through scientific decision making.