Module 1: Introduction to managerial economics ECON 101fifth_semester_managerial_economics_first_chapter

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Managerial Economics Module 1: Introduction to managerial economics Meaning and definition economics- economic theory and managerial economics-nature and scope of managerial economics-relationship... to other branches of learning-usefulness of managerial economics Definition and scope of managerial economics: Managerial economics is economics applied in decision-making. It is that branch of economics which links abstract theory with managerial practice. Economics is a science concerned with the problem of allocating scarce resources with competing ends. Managerial economics may also be taken as economics applied to problems of choice of alternatives and allocation of scarce resources by the firms. Managerial economics is goal oriented and aims at maximum achievement of objectives. Managerial economics emerged only in the early part of 1950’s. Managerial economics generally refers to the integration of economic theory with business practice. Economics provides the tools which explain the various aspects such as demand, supply, price, competition etc. Economic principles by themselves do not offer ready-made solutions applicable in the changing business world. After the Second World War and particularly after 1950, with the expansion of business all over the world, the business manager was faced with many problems due to changing business environment. The prime function of a management executive in a business organization is decisionmaking and forward planning. The decisions and forward planning is for the future, which is uncertain. In the real world, the business manager rarely has complete information as to future sales, costs, profits, capital etc. Hence decisions are made and plans formulated on the basis of past data, current information and the estimates about future predicted as best as possible. As plans are implemented over time, therefore, plans may have to be revised and different courses of action adopted. Managers are thus 1engaged in a continuous process of decision-making through an uncertain future and the overall problem confronting them is one of adjusting to uncertainty. In fulfilling the function of decision-making in an uncertainty frame-work, economic theory can be pressed into service with considerable advantage. Economic theory deals with a number of concepts and principles relating to profit, demand, c0st, pricing etc. Which aided by allied disciplines like accounting, statistics and mathematics can be used to solve the problems of business management. Definition of managerial economics: According to Mcnair and Meriam,” Managerial economics is the use of economic modes of thoughts to analyse business situation”. According to Prof. Watson,” Price theory in the service of business executives, is known as managerial economics”. Prof. D.C.Haque defines managerial economics as,” a fundamentally an academic subject which seeks to understand and to analyse the problems of business decision-taking”. According to W.W.Haynes, managerial economics is the study of the allocation of resources available to a firm or other unit of management among the activities of that unit”. Spencer has defined managerial economics as,” managerial economics is the integration of economic theory with business practice for the purpose of facilitating [Show More]

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