Managerial Economics Introduction

SCOPE Managerial economics constitute the following subject

matters: Demand Analysis & Forecasting Choice of Input Mix & Technology Pricing & Market Management Profit Management Investment decisions Sales Promotion and Market Strategy

SCOPE Techniques used with Managerial Economics for

decision making.

Managerial Economics & Traditional Economics Managerial Economics & Operational Research Managerial Economics & Mathematics Managerial Economics & Statistics Managerial Economics & Theory of Decision

Making

Managerial Economics & Traditional Economics Basic concepts and analytical tools are applied to

business situation. Both deals with scarcity of resource and resource allocation. Main contributions are: a) understanding market conditions and general economic environment. b) understanding & analyzing resource allocation problems. Economic analysis for technical & economic efficiency.

Managerial Economics & Operations Research Both concerned with making effective decision for

firm’s objectives. Model building : - economics' models are confined to broad economic decision making whereas OR models are job-oriented and situational. Eg: queuing, linear programming. OR is expensive and time consuming but provides accurate solutions.

Managerial Economics & Operations Research Limitations of OR

-- can only be used for problems of where OR’s use can generate potential savings. --for small problems, OR solutions must be applicable to other similar problems.  Managerial economics has come up with tools for instant OR.

Managerial Economics & Mathematics Managerial economics is both conceptual and metrical. Metrical: estimate & predict economic factors for decision

making and forward planing. Mathematics posses concepts and allows operations- no managerial equivalent in descriptive analysis. Geometry, algebra, calculus are main branches used. Logarithms, vectors, determinants are concepts used.

Managerial Economics & Statistics Managerial economics aims at Quantifying past

economic activity and predict future course . Statistics can deal with uncertainty principle. Managerial economics uses probability to solve problems of decision making.

Managerial Economics & Theory of Decision Making Economic theory is based on assumption of

single goal - profit maximization. Decision making looks for solutions that balance conflicting objectives. Economic theory serves for simple & situations with clear cut objectives. Theory of decision making serves for complex problems with multiple goals.

Conclusion Managerial economics integrates ideas from

various specialized functions and disciplines into an overall point of view – the perspective of a good manager.