Posted by Chetan Chitre in Introduction, Managerial Economics.
Managerial Economics –
Managerial Economics is a branch of economics that studies application of principles of economics to various business situations.
A Business organization is essentially a group of people who have come together for attaining certain common objectives. These objectives are largely material in nature – eg. profits, salaries, production for the purpose of consumption, etc. The behavior of this group of people is therefore a subject matter of study for economics.
A Business Manager is responsible for leading this group of people in the direction of attainment of the objectives. In this capacity she has to take several decisions during the course of her day-to-day operations. An understanding and application of principles of economics would help the Business Manager to take appropriate decisions under various situations.
Scope of Managerial Economics –
Principle of Economics can help a Manager in taking decisions in various business situations. These can be summarized with the help of the following diagram –
Business Decisions are primarily centered around Production and Sales. In addition to this, the environment in which a business organization operates has an impact on the Business Decisions. Various topics in Economic Theory help Business Managers in their functions.
(i) Sales, Marketing and Advertising – Sales, marketing and advertising related decision need an in-depth understanding of the Consumer Behavior. We need to understand the reasons for consumption, factors affecting consumption, constraints faced by the consumers, the decision-making process of the consumer as regards price to be paid, quantity to be purchased, allocation of resources between different needs, etc.
Theory of Demand helps in developing an understanding between Price and quantity demanded.
Price Elasticity helps us understand the ability and willingness to pay of... [continues]
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