Meaning: - Managerial Economics deals with money/income. It helps in decision making regarding sales, production, and profit. It is a branch of economics that applies microeconomics analysis to decision methods of businesses or other management units. Artha – Money/Income Shasthra – Body of Knowledge Economics – Body of knowledge which deals with the management of money.
DEFINITIONS OF MANAGERIAL ECONOMICS
• According to Edwin Mansfield, “Managerial economics is concerned with the ways in which managers should make decisions in order to maximize the effectiveness or performance of the organizations they manage.”
• Prof. Even Douglas says, “Managerial Economics is concerned with the application of economic principles and methodologies to the decision making process within the firm or organization under the conditions of uncertainty.”
• According to Spencer and Siegel man, “Managerial Economics is the integration of economic theory with Managerial practices for the purpose of facilitating decision making and forward planning by management.”
The Three Basic Economic Questions
FROM THE STANDPOINT OF THE COUNTRY
1. What goods and services should be produced?
2. How should these goods and services be produced?
3. For whom these goods and services to be produced?
FROM THE STANDPOINT OF THE COMPANY
1. The product decision.
2. The hiring, staffing, procurement, and capital budgeting decisions.
3. The market segmentation decision.
SCOPE OF MANAGERIAL ECONOMICS
The scope of managerial economics is very wide as it involves the application of economic concepts and analysis to all the problems and areas of the manager and the firm. Managerial Economics deals with four problems in both decision making and forward planning. These problems are:
1. Resource allocation for optimal results, 2. Inventory and queuing problem, 3. Pricing problems i.e. fixing prices