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shreyadas January 31st, 2012 02:01 PM

Managerial Economics
 
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 a bridge between economics and business management.
PRACTICAL SIGNIFICANCE OF MANAGERIAL ECONOMICS
PRACTICAL SIGNIFICANCE OF MANAGERIAL ECONOMICS
1. Price and Output Decisions:
Managerial economics plays a significant role in the price of output decisions. Using the various economic theories, cost concepts and their relation with output can be analysed to predict the control or reduction in cost of commodities, etc.
1. Demand Estimation:
Managerial economics helps in the study of demand of the goods in the market, forecasting the demand for product launching or predicting the production and supply, etc. It also studies the elasticity of demand & plans the business strategies accordingly.
1. Choice of a Technique of Production:
Managerial Economics is concerned with the usage of scarce resources & itís alternative uses so as to achieve maximum profit. Thus by using economic theories, techniques for production can be chosen for best results.
1. Advertising Decision:
Managerial Economics studies the demand of goods in the market, the cost of production and supply, etc. It also is aware of the price and demand elasticity of products. Using this knowledge, advertising budgets and strategies can be designed.
1. Long Run Production decision:
With the help of demand analysis and forecasting plans for long run production can be finalized.
1. Investment Decision:
Using the demand analysis and various forecasting techniques for estimation of demand and costs in the long run investment decisions can be taken.


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