THE NATURE AND SCOPE OF MANAGERIAL ECONOMICS
Nature Of Managerial Economics
Managerial Economics and Business economics are the two terms, which, at times have been used interchangeably. Of late, however, the term Managerial Economics has become more popular and seems to displace progressively the term Business Economics. The prime function of a management executive in a business organization is decision-making and forward planning. Decision-making means the process of selecting one action from two or more alternative courses of action whereas forward planning means establishing plans for the future. The question of choice arises because resources such as capital, land, labour and management are limited and can be employed in alternative uses. The decision-making function thus becomes one of making choices or decisions that will provide the most efficient means of attaining a desired end, say, profit maximization. Once decision is made about the particular goal to be achieved, plans as to production, pricing, capital, raw materials, labour, etc., are prepared. Forward planning thus goes hand in hand with decision-making. A significant characteristic of the conditions, in which business organizations work and take decisions, is uncertainty. And this fact of uncertainty not only makes the function of decision-making and forward planning complicated but adds a different dimension to it. If knowledge of the future were perfect, plans could be formulated without error and hence without any need for subsequent revision. In the real world, however, the business manager rarely has complete information and the estimates about future predicted as best as possible. As plans are implemented over time, more facts become known so that in their light, plans may have to be revised, and a different course of action adopted. Managers are thus engaged in a continuous process of decision-making through an uncertain future and the overall problem confronting them is one of adjusting to uncertainty. [pic]Definition Of Managerial Economics
According to McNair and Meriam, Managerial Economics consists of the use of economic modes of thought to analyse business situation Spencer and Siegelman have defined Managerial Economics as “the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management”. We may, therefore define Managerial Economics as the discipline which deals with the application of economic theory to business management. Managerial Economics thus lies on the borderline between economics and business management and serves as abridge between economics and business management and serves as a bridge between the two disciplines.
Analysis of individual demand
Individual Demand for Public Goods
The analysis is designed to contribute to the derivation of a “theory of demand for public goods and services.” Difficulties arise at the very outset, however, when we begin to think about public goods and services in such terms. For our purposes, any good or service that the group or the community of individuals decides, for any reason, to provide through collective organization will be defined as public. The inclusive category may include some goods that Samuelson and others have designated as “purely collective,” but it may also include other goods and services, with the degree of “publicness” ranging from zero to 100 per cent. The inclusive definition is suitable because our purpose is that of analyzing the organization of public-goods provision, and not that of determining the proper classification of particular goods and services independently of organization. Our purpose is not that of answering the question: What goods should be public?
Purely Collective Goods
It is, however, precisely because goods and services that are provided governmentally are rarely, if ever, wholly collective that...