It gives managers the tools and techniques to use for day-to-day decision-making and to utilize resources more efficiently. A managerial economist can serve the management best only if he always keeps in mind the main objective of his firm, which is to make a profit. Companies can integrate their own customer buying habits and behavior data into the applicable formulation and get useful decision-making results. Many factors feed this theory such as income, demographics and socioeconomic issues. The answer to all these questions remains only with the managerial economy.
Marketing and promotional strategies: Marketing strategies rely on the level of consumer demand for goods and services. Its coordinates economic theory and business practices and makes the right decision. Similarly, multiple regression technique is used. Managers need to use these limited resources optimally. To accomplish this, managerial economics uses a wide variety of economic concepts, tools and techniques in the decision-making process. Some of the important types of business decisions are given below: i Production Decisions : Production is an economic activity which supplies goods and services for sale in a market to satisfy consumer wants thereby profit maximisation is made possible. Its coordinates economic theory and business practices and makes the right decision.
More Sophisticated and New topic Managerial Economics is More sophisticated and new topic. The managerial theory provides the maximum help to a business manager in his decision making and business planning. It is concerned with economic behaviour of the firm. So it also uses them all in cost and advance analysis, demand and , production quantity and pricing and also for maximization of profits. These decisions are based on the economic rationale and are valid in the existing economic environment. Cash is paid to credit sellers. Managerial economics focuses on these social obligations while taking business decisions.
Without this, no business can progress. Leontief tries to establish inter industry relationships by dividing the economy into different sectors. When we apply the game theory, we have to consider the following: i The players are the two firms; ii They play the game in the market place; iii Their strategies are their price or output decision; and iv The pay-offs or rewards are their profits. Pricing is actually guided by consideration of cost plan pricing and the policies of public enterprises. Thus we see that a firm has uncertainties to rock on with. And the salient features and significance of managerial economics are also good.
As mentioned above, the managerial economist has an important role to play. But managerial theory deals with the application of certain principles to solve the problem of a firm. For example, the statement that profits are at a maximum when marginal revenue is equal to marginal cost, a substantial part of economic analysis of this deductive proposition attempts to reach specific conclusions about what should be done. This is because adding a worker to an activity also necessitates adding other inputs like machine, time, electricity etc. The functions of a managerial economist can be broadly defined as the study and interpretation of economic data in the light of the problems of the management.
It enables optimum utilization of scarce resources in such organizations as well as helps in achieving the goals in most efficient manner. That bridges the gap between abstract theory and managerial practice. But in order to be objective, the approach must be based on relevant, adequate and reliable data. It is organisational in that many decisions transcend the individual manager and become the product of groups, teams, committees, etc. The most important obligations of a managerial economist is that his objective must coincide with that of the business. Because he plays the most important role in these tasks.
Supporting the Manufacture and use of Models Managerial Economics creates an economic model for managers to inspire their use in business. In decision making, cost estimates are very essential. The Managerial Economics is the branch of economics. Please reference authorship of content used, including link s to ManagementStudyGuide. The logic of linear programming is deduction of mathematical form.
Helpful in Forecasting One of the Best Key Features of Managerial Economics. The managerial economist should establish and maintain many contacts and data sources which would not be immediately available to the other members of management. Theory of the Firm One concept of managerial economics is the theory of the firm, which deals with the primary profit motive of a firm. Economists distinguish between the short run and the long run in discussing the determination of price in a given market because in the long run a firm must cover its full cost. Managerial economics only describes the predictable economic consequences of such actions. The purchase decision is concerned with the objective of acquiring these resources at the lowest possible prices so as to maximise profit.
Uses of Managerial Economics in Business Decision Making Managerial Economics Is a Tool for Improving Management Decision Making Importance of Managerial Economics to Managers Managerial economics has applications in both profit and not-for-profit sectors. If they are found relevant for decision-making. The decision to hold inventories to meet demand is quite important for a firm and in certain situation the level of inventories serves as a guide to plan production and is therefore, a strategic management variable. As the demand and decrease in the law of demand decreases and increases in demand. 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 is concerned with recording the financial operation of a business firm.
Dynamic programming helps in solving certain types of sequential decision problems. The post-Keynesian aggregative theory has direct implications for forecasting general business conditions. All are best Notes for Your University Examinations Preparation. To conclude, a managerial economist has a very important role to play. The basic purpose of the approach is to develop a scientific model of the system which may be utilised for policy making.