The stress is on applied economic analysis. The selection of a location, selection of a product line, and decision relating to manage the business are all basic decisions. Managerial Economics includes demand, production, cost, pricing, market structure, and government regulations. Sometimes, it is believed that managerial economics is an extension of microeconomics. Decision making is both a managerial function and an organisational process. The managerial economist should recognise his responsibilities to make successful forecast.
But their virtue lies in the fact that they allow the analyst to understand, explain and predict the future course of events. For this purpose, trend projections are used. Resource allocation is important regardless of the economic and political system of a country. Factors affecting Managerial decision Often only pure logic does not contribute to decision making Human Factor Human behavioral considerations often influences a manager into compromising or moderation a decision which would otherwise have made. Learning Objective 1 Understand the role of management accountants in an organization. A business manager has to take both short-term and long-term decisions.
Only conceptual knowledge is of no use. Pricing and Competitive Strategy: Pricing decisions are often within the purview of company economists. Other factors could be brand names, sometimes people buy more expensive products because of the brand, another factor could be is there enough supply to go around, if they run out of that product will people wait or will they go buy the other one. The determination of the best combination of price and quantity 4. Yes, they are close competitors and are substitutes because one product is cheaper than the other, so people will buy the cheaper one, even if they are the same product. The main topics dealt with are: Cost of Capital, Rate of Return and Selection of Projects.
The functions of a managerial economist can be broadly defined as the study and interpretation of economic data in the light of the problems of the management. Managerial Economics requires Art Managerial economist is required to have an art of utilising his capability, knowledge and understanding to achieve the organizational objective. Thus macro-economics is aggregative economics. Suppose forecasting has to be done. A successful business manager is one who can form more or less correct estimates of costs and revenues likely to accrue to the firm at different levels of output.
It is often asked what the method of science is, whether induction or deduction? Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. Each position of the organisation has certain specific contributions to achieve organisational objectives. A successful business manager is one who can form more or less correct estimates of costs and revenues at different levels of output. Statistical methods are used for such comparison among past, present and future estimates. When we apply the game theory, we have to consider the following: i The players are the two firms; ii They play the game in the market place; iii Their strategies are their price or output decision; and iv The pay-offs or rewards are their profits.
It studies the economic aspects of managerial decision making. Much of the economic theory is based on the assumption of single goal-maximisation of utility for the individual or maximisation of profit for the firm. The personal goals would include such things as salary, job security, status, prestige, professional excellence and job satisfaction. The application of pure economic theory seldom leads us to direct executive decisions. In management parlance and in their quest to specialize, these may be subdivided into production, operations research, materials management, finance, marketing, consumer behaviour, competition, market structures etc. The main topics discussed under cost and production analysis are: Cost concepts, cost-output relationships, Economics and Diseconomies of scale and cost control. This is all described in this area.
Leontief tries to establish inter industry relationships by dividing the economy into different sectors. It is helpful in making such short term and long term decisions as: which products and services to produce? The theory of decision making is concerned with how expectations are formed under conditions of uncertainty. The prospects of an individual firm often depend largely, if not entirely, on the condition of business in general. The most important obligations of a managerial economist is that his objective must coincide with that of the business. To recall, a major role of a manager is obtaining and processing information. Capitalism, Communism, Economics 1946 Words 7 Pages Definition of Economics The social science concerned with the efficient use of limited or scarce resources to achieve maximum satisfaction of human materials wants.
Robbins regards economics as a pure science of what is, which is not concerned with moral or ethical questions. But managerial theory deals with the application of certain principles to solve the problem of a firm. Managerial economics is thus realistic in nature. An individual firm can do little to affect the environment. To maximize value, management must: a. The second involves utilizing readily available information to carry out a course of action for furthering the goals o£ the organization.
It concentrates on the decision process, decision model and decision variables at the firm level. Business, Economics, Macroeconomics 956 Words 4 Pages 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. We shall now proceed to discuss the last part of our investigation the responsibilities of a managerial economist. Managerial economics makes use of correlation and multiple regression in business problems involving some kind of cause and effect relationship. Costs, Economic cost, Economics 312 Words 2 Pages The Nature and Scope of Managerial Economics Dr. The managerial problem of planning and control of capital is examined from an economic stand point.