Mathematical approach to economic theories makes them more precise and logical. The parts of micro and macro economics that constitute managerial economics depend on the purpose of analysis. For instance, the law of demand states that as price increases. It is employed when the objective function is to maximise profit, output or efficiency. It remains confined to descriptive hypothesis.
The historical method requires experience not only in collecting data but also in finding out their relations and significance in the particular context. It is a study of particular firms, particular households, individual prices, wages, incomes, individual industries and particular commodities. Briefly, capital management implies planning and trolls of capital expenditure. Explain why neither statement is precisely correct, and how demand and supply together create the market for goods and services. Expenses are met and incomes derived. The prime determinant of direct demand is the utility gained by consumption of goods and services. For firms, this value is measured in terms of the profit created through resource employment.
It has nothing to do with abstract economic theory which has no practical application to solve the problems faced by business firms. Certain important aspects of supply analysis are supply schedule, curves and function, law of supply and its limitations. Responsibilities of a Managerial Economist: We have analysed the nature, scope and methods of managerial economics. These factors have to be thoroughly analysed by the managerial economist and answers to the following questions have also to be found out: i What are the current trends in the local, regional, national and international economies? Managerial economists are generally preoccupied with the optimum allocation of scarce resources among competing ends with a view to obtaining the maximum benefit according to predetermined criteria. Thus macro-economics is aggregative economics.
The use of this material is free for learning and education purpose. Positive and normative approach b. To analyse the impact of the organisational structure in the working of business enterprises, it is widely used by the managerial economist. He cannot expect to succeed in serving management unless he has a strong conviction which helps him in enhancing the ability of the firm. Managerial Economics and Mathematics : Mathematics is yet another important subject closely related to managerial economics. This type of cost is equal to the loss of potential gains when compared to alternatives. The structure of the market refers to the degree of competition in the market for the firms goods and services.
Forecasting of a new product. Managerial Economics, however, is concerned with what decisions ought to be made and hence involves value judgments. The managerial theoretical concepts and techniques are basic to the entire gamut of managerial theory. Recently, managerial economists have started making increased use of Operational Research methods. He should have a rare intuitive ability of perception. The roots of managerial economics spring from micro-economic theory.
One of the hallmarks of a good executive is the ability to take quick decision. To classify the scope of a field of study is to discuss its relation to other subjects. Pricing Decisions, Policies and Practices: Another task before a business manager is the pricing of a product. He may face problems relating to best combination of the factors to gain maximum profit or how to use different machine hours for maximum production advantage, etc. The managerial economics is constantly faced with the choice between models ignoring uncertainty and those that explicitly incorporate probability theory. The managers of these firms must make judgements about the disposition of their resources and decide which priorities among the various competing claims they have upon them. Platinum Platinum quality Add 15% to price.
Economic theory deals with a study of individual firm as well as individual consumer. A business unit operates within some economic environment which is in turn shaped by the behaviour of the economy as a whole. Statistics is a very useful science for business executives because a business runs on estimates and probabilities. Samuleson remarks economics newest of science, indeed the queen of the social science. The important topics covered in this field of study are: Market Structure Analysis, Pricing Practices and Price Forecasting. Though it's never a bad idea to continue your education with a podcast while you cook or to read an economic theory e-book on your Kindle before bed, you can get a basic feel for the key characteristics of managerial economics by boiling it down to a few basic principles.
It is a fact finding approach related mainly to the present and abstract generalisations through the cross sectional study of the present situation. The managerial economist should establish and maintain many contacts and data sources which would not be immediately available to the other members of management. We can programme a complex system of relationship with the help of this method. In addition, it also seeks to apply profit theory, which forms part of distribution theories in economics. It concentrates on controlled experiments and investigates the behaviour of preconceived elements in a highly simplified environment. For example, sampling is very useful in data collection. It makes use of economic theory and concepts.
Law of Demand, Market Demand, Elasticity of demand. It is employed to get the optimum solution. Demand Curve The demand function specifies the relation between the quantity demanded and all factors that determine demand. They are considered basic because they affect the whole organisation. Characteristics of Managerial Economics — i Managerial economics is micro-economic in character. Economics is neutral between ends. It is based on economic analysis for recognizing problems, organizing information and evaluating alternatives.
In addition, it also seeks to apply Profit Theory, which forms part of Distribution Theories in Economics. It is the duty of the managerial economist to provide necessary intelligence. Hence, it becomes necessary to redesign economic ideas to the practical world. Managerial economics encourages you to approach each decision with two tools in hand: Economic concepts and decision silences. By making the best possible forecasts, the management can follow a more closely course of business planning.