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INTRODUCTION TO
MANAGERIAL
ECONOMICS
Meaning and Definition
Nature Scope & Subject- Matter
Significance
Role of Managerial Economist
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Meaning of Managerial
Economics
In simplest of sense
Manager ial econom ics is:
Application of economic theory in
business decision making.
It deals with the use of economic
concepts, tools and methods in managerialdecision making.
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Managerial Economics
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Definitions:
Haynes, Mote and Paul-
Managerial Economics is economics applied indecision making. It is a special branch of
economics bridging the gap between abstracttheory and managerial practice.
Spencerand Seegelman -
Business Economics (Managerial Economics)
is the integration of economic theory withbusiness practice for the purpose of facilitatingdecision making and forward planning bymanagement.
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Mansfield-
Managerial economics is concerned with
application of economic concepts and
economic analysis to the problems offormulating rational managerial decision.
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Nature Of Managerial
Economics
Managerial Economics is science of decisionmaking concerned with finding andimplementing of the solution to managerialproblems.
It is Normat ive in approach, It deals withprescription what a firm should do and how itshould achieve it.
Positive science is descriptive in nature itdeals with what is, what was and what will be.Managerial economics is not positive in itsapproach.
Managerial economics is more Pragmatic
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ME with MICRO & MACRO
Managerial Economics is basically a blend ofEconomics and Management. Two branches ofeconomics i.e. micro economics and macroeconomics are the major contributors to
managerial economics.Managerial Economics and Micro Economics
Micro Economics is a broader concept ascompare to Managerial Economics. Micro
Economics forms the foundation of managerialeconomics. Almost all the concepts of ManagerialEconomics are the perceptions of MicroEconomics concepts.
Manager ial econom ics can be perceived as an
appl ied Micro Econom ics.
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Managerial Economics and Macro Economics
All the firms operating in the market have to
take under consideration the constituent of theeconomic environment in which they operate
for its proper functioning. This economic
environment is nothing but the Macro
economics elements.
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Subject Matter and Scope
***Managerial economics also drawstogether and relates ideas from variousfunctional areas of management likeproduction, marketing, finance and
accounting.***
Managerial economics performs two majorfunctions:
1) Decision making, and2) Forward Planning
Contd..
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And this functions are to be performedunder uncertainty, for this the followingsubject matter s are covered under its
study:1) Demand and Supply Analysis
2) Production and Cost
3) Market Structures
4) Price and Output Decision
5) Profit Analysis
6) Basics of Macro economics , etc
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Role of Managerial
Economist:A managerial economist helps the management byusing his analytical skills and highly developedtechniques in solving complex issues of successfuldecision-making and future advanced planning.
The role of managerial economist can be summarizedas follows:
He studies the economic patterns at macro-level andanalysis its significance to the specific firm he is workingin.
He has to consistently examine the probabilities oftransforming an ever-changing economic environmentinto profitable business avenues.
He assists the business planning process of a firm.
He also carries cost-benefit analysis.
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He has to undertake certain specific
functions such as:
1) Demand forecasting
2) Cost and pricing decision
3) Economic analysis of industry
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Significance of managerial
Economics
Price and Output Decisions
Demand Estimation
Choice of a Technique of Production
Advertising Decision
Long Run Production decision
Investment Decision