The determination of the best combination of price and quantity 4. A background knowledge of the fundamental methods and principles of economic theory enables one to make wide and rational choices. It deals with a firm. To classify the scope of a field of study is to discuss its relation to other subjects. The economist has no right to pass judgment on the wisdom or folly of the ends itself. Making the Best Decision To establish appropriate decision rules, managers must understand the economic environment in which they operate.
The business executive has to make the rational allocation of available resources at his disposal. The short run incremental cost ignoring the fixed cost is only Rs. The use of Managerial Economics is not limited to profit-making firms and organizations. A businessman has to take mainly two different but interrelated decisions in marketing. . Because the survival, growth and prosperity of the firm are often linked to what is happening to the gross national product, the general level of employment, and the general price level, there is a need to relate the economics of the firm with the economic system.
Instead of explaining what a firm is doing, we explain what it should do to make its decision effective. Thus we see that a firm has uncertainties to rock on with. Is there a change occurring in the purchasing power of the public in general or in some particular regions? Implement and monitor the decision. Among the social sciences, economics is the most advanced in terms of theoretical orientations. Relation of Managerial Economics to Other Areas of Management : It is possible to establish link of managerial economics to other areas of management. All other qualifications beingsame, managers with working knowledge of economics can perform their function moreefficiently than those without it. This gives rise to understand the concepts of managerial economics for business manager, so that he may apply the economic principles to the business and appraise the relevance and impact of external factors in relation to the business.
But in actual practice this may not be possible to attain due to resource constraints. When demand is estimated, the manager does not stop at the stage of assessing the current demand but estimates future demand as well. Econometrics is defined as use of statistical tools for assessing economic theories by empirically measuring relationship between economic variables. It takes into account almost all the problems andareas of manager and the firm. Under cost analysis we will take intoaccount determinants of costs, method of estimating costs, the relationship between cost andoutput, the forecast of the cost, profit, these terms are very vital to any firm or business.
Business economics, in the true sense is the integration economic principles with business practise. Taking up the services from us, you can get the top-notch grades in your academics. Evaluating Choice Alternatives Managerial economics identifies ways to efficiently achieve goals. Managerial economics refers to those aspects of economic theory and application which are directly relevant to the practice of management and the decision making process within the enterprise. This forecast can also serve as a guide to management for maintaining or strengthening market position and enlarging profit. Meaning of Managerial Economics 4. Management of Public Sector Enterprises : Managerial economics can also be applied to the decision making process of non-profit seeking and public sector enterprises.
These questions quite naturally arise out of questions i, ii and iii. It is from this plan that each department has to ensure that it includes in its budget funds for training staff. Decision or action is wor … thwhile already if the decision maker or is the firm can expect to be better off than before. It is organisational in that many decisions transcend the individual manager and become the product of groups, teams, committees, etc. Vertical managerial decision this means that the decisions are taken vertically that is from top level to bottom level.
Subject Matter of Marginal Economics: i Demand Analysis and Forecasting : A firm is an economic organisation which transforms inputs into output that is to be sold in a market. It enables the business executive to assume and analyse things. Certain important correlation and association of attributes can be found with the help of statistics. In the entire process of management and in each of the management activities such as planning, organising, leading and controlling, decision making is always essential. Therefore demand analysis is something which is necessary for the production function tohappen.
But managerial theory deals with a study of only profit theories. The same is true of manufactured goods; it is usually possible to produce the same output by several different techniques, ranging from ones using large quantity of labour and a few machines to one using a large quantity of highly automated machines and only a very small number of workers. They are automatically required to revisit their needs in the budget and rescale the preferences. However, the decision made must confine to other liming factors. Such decisions require an act of investment or capital expenditure which will yield a return in future periods. This gives rise to understand the concepts of managerial economics for business manager so that he may apply the economic principles to the business and appraise the relevance and impact of external factors in relation to the business.
This method is mainly concerned with the collection of data. To discharge his role successfully, he must recognise his responsibilities and obligations. The techniques of managerial economics help in making decisions regarding the sales promotion, promotion of the product also helps in choosing the area or sector where the firms can do good business. Economic theory deals with a study of distribution theories of rent, wages, interest and profits. The ability to select important factors issues and ignore insignificant ones enables managers to tackle the problems they are faced with. If we have an idea of the past events, we can understand the current economic problems much better. The proper answer to this is, both.