Managerial economics is a science that deals with the application of various economics theories, principles, concepts and techniques to business management in order to solve business and management problems It deals with the practical application of economic theory and methodology to decision-making problems faced by private, public and non profit making organizations..
In the words of Spencer and Seigelman "Managerial Economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by the management."
Scope of Managerial Economics
The term "scope" indicates the area of study, boundaries, subject matter and width of a subject. Business economics is comparatively a new and upcoming subject. The following topics are covered in this subject :-
1) Objectives of a firm :- Profit maximization has been considered as the main objective of a business unit in olden days, but in the context of present day business environment ,many new objectives have come to the fore. Today, there are multiple objectives and they are multi dimensional in nature. Some of them are competitive while others are supplementary in nature. There are economic, social, organizational, human and national goals. There are managerial and behavioral theories.
2) Demand Analysis and Forecasting :-A firm is basically a producing unit. It produce different kinds of goods and services. It has to meet the requirement of consumers in the market. The basic problems of what to produce where to produce, for whom to produce, how to produce and how to distribute them in the market are to be answered by a firm.
3) Production and Cost Analysis :-Production implies transformation of inputs into outputs. It may be either in physical or monetary terms. Maximization of outputs is one of the basic goals of a firm. Production analysis deals with production function, laws of return, returns to scale, economies of scale etc. Maximization of...
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