Nature and Scope

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The Nature and Scope of Managerial Economics

Dr. Mohammad Abdul Mukhyi, SE., MM

Economics is the social science that studies the production, distribution, and consumption of goods and services. Managerial economics (sometimes referred to as business economics), is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units. As such, it bridges economic theory and economics in practice. It draws heavily from quantitative techniques such as regression analysis and correlation, Lagrangian calculus (linear). If there is a unifying theme that runs through most of managerial economics it is the attempt to optimize business decisions given the firm's objectives and given constraints imposed by scarcity, for example through the use of operations research and programming. 4/18/2010 Managerial Economic 2


Managerial Economics
Manager A person who directs resources to achieve a stated goal. Economics The science of making decisions in the presence of scare resources. Managerial Economics The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal. 4/18/2010 Managerial Economic 3

The Global Trade Economy

The Metropolitan Bioregional Economy Organic & Specialty Agriculture Local Commerce (locally produced goods and services) Construction (Housing, etc.) Education (basic, life management, citizenship) Basic & Holistic Health Care & Education Hand Crafts Arts Sports Child Care Elder Care Home & Yard Care Sustainable Land Use Employment Security Education (basic, life management, citizenship) Urban Environment & Social Welfare Services Conservation & Recreation Local Philanthropy

Market Sectors

Commodity Agriculture (wheat, rice, soybeans, beef, coffee, bananas, etc.) Electronics Vehicles High Tech Health Care, Pharmaceuticals Hardware Mass Produced Clothing, Cloth Goods Hydrocarbon-Based Energy Financial Services Short term R&D

Public Goods (The "Commons" )

Global Ecology Fair Trade Policies National Defense Long Range R&D Catastrophic Reinsurance (health, disasters, etc.) Coordination of Health, Education, Welfare (Information and infrastructure investments) Major (Corporate, Foundations, etc.) Philanthropy

Bernard Lietaer and Art Warmoth, © 1999
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Managerial Economic


How Is Managerial Economics Useful?
Evaluating Choice Alternatives
Identify ways to efficiently achieve goals. Specify pricing and production strategies. Provide production and marketing rules to help maximize net profits.

Making the Best Decision
Managerial economics can be used to efficiently meet management objectives. Managerial economics can be used to understand logic of company, consumer, and government decisions. 4/18/2010 Managerial Economic 6


Managerial economic refers to the application of economic theory and the tools of analysis of decision science to examine how an organization can achieve its aims or objectives most efficiently. The scope of managerial economics: - Economic sciences - Decision sciences - Other science having an effect on to decision making.


Managerial Economic


Out of two major managerial functions served by the subject matter under managerial economics are decision making and forward planning: Lets explore the scope for decision making: 1. Decision relating to demand. 2. Decision related to Cost and production. 3. Decision relating to price and market. 4. Decision relating to profit management. 5. Macro economic factor.


Managerial Economic



Relationship to economic theory 1. Micro economic 2. Macro economic Penekanan: 1. Normative economic 2. Positif economic Relationship to the decision sciences Ilmu ekonomi memberikan kerangka teoritis pengambilan kepusuan manajerial untuk membentuk model-model keputusan, menganalisis...
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