Chief Characteristics Of Managerial Economics
It would be useful to point out certain chief characteristics of Managerial Economics, inasmuch it’s they throw further light on the nature of the subject matter and help in a clearer understanding thereof.
Managerial Economics micro-economic in character.
Managerial Economics largely uses that body of economic concepts and principles, which is known as ‘Theory of the firm’ or ‘Economics of the firm’. In addition, it also seeks to apply Profit Theory, which forms part of Distribution Theories in Economics. 3.
Managerial Economics is pragmatic. It avoids difficult abstract issues of economic theory but involves complications ignored in economic theory to face the overall situation in which decisions are made. Economic theory appropriately ignores the variety of backgrounds and training found in individual firms but Managerial Economics considers the particular environment of decision-making. 4.
Managerial Economics belongs to normative economics rather than positive economics (also sometimes known as descriptive economics). In other words, it is prescriptive rather than descriptive. The main body of economic theory confines itself to descriptive hypothesis, attempting to generalize about the relations among different variables without judgment about what is desirable or undesirable. For instance, the law of demand states that as price increases. Demand goes down or vice-versa but this statement does not tell whether the outcome is good or bad. Managerial Economics, however, is concerned with what decisions ought to be made and hence involves value judgments.
Production and Supply
Production analysis is narrower in scope than cost analysis. Production analysis frequently proceeds in physical terms while cost analysis proceeds in monetary terms. Production analysis mainly deals with different production functions and their managerial uses.
Supply analysis deals with various aspects of supply of a...
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