Answer:
Managerial economics is a science that deals with the
application of various economic 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.
The same idea has been
expressed by Spencer and Seigelman in the following words. “Managerial
Economics is the integration of economic theory with business practice for the
purpose of facilitating decision making and forward planning by the
management”. According to Mc Nair and Meriam, “Managerial economics is the use
of economic modes of thought to analyze business situation”. Brighman and
Pappas define managerial economics as,” the application of economic theory and
methodology to business administration practice”. Joel dean is of the opinion
that use of economic analysis in formulating business and management policies
is known as managerial economics.
Features of managerial
Economics
1. It is more realistic,
pragmatic and highlights on practical application of various economic theories
to solve business and management problems.
2. It is a science of
decision-making. It concentrates on decision-making process, decision-models
and decision variables and their relationships.
3. It is both conceptual and
metrical and it helps the decision-maker by providing measurement of various
economic variables and their interrelationships.
4. It uses various macro
economic concepts like national income, inflation, deflation, trade cycles etc
to understand and adjust its policies to the environment in which the firm
operates.
5. It also gives importance to
the study of non-economic variables having implications of economic performance
of the firm. For example, impact of technology, environmental forces,
socio-political and cultural factors etc.
6. It uses the services of many
other sister sciences like mathematics, statistics, engineering, accounting,
operation research and psychology etc to find solutions to business and
management problems.
It should be clearly remembered
that Managerial Economics does not provide ready-made solutions to all kinds of
problems faced by a firm. It provides only the logic and methodology to find
out answers and not the answers themselves. It all depends on the manager’s
ability, experience, expertise and intelligence to use different tools of
economic analysis to find out the correct answers to business problems.
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