Basic finance terms that every entrepreneur should fully understand

Content type

User Generated

Type

Study Guide

Uploaded By

Znhyvx

Pages

136

Rating

BACHELOR OF COMMERCE (B.COM.,)

PAPER – 2.1

MANAGERIAL ECONOMICS

UNIT – I

CHAPTER - I

SECTION - I

Definition of Managerial Economics

Managerial economics refers to those aspects of economics and its tools of analysis most relevant to the

firm’s decision-making process. According to MeNair and Meriam, managerial economies consists of the use of

economic models of thought to analyze business situations. Some writers consider managerial economics as the

integration of economic theory with business practice for the purpose of facilitating decision-making and forward

planning by management. The underlying idea of all these definitions is that managerial economics means economics

applied in decision-making. So we may consider managerial economics as a special branch of economics bridging

the gap between abstract theory and managerial practice.

It may be pointed out here that effective decision-making at the firms’ level calls for a careful analysis of a

choice between alternative courses of action. Economic theory offers a variety of concepts and analytical tools which

can be of considerable assistance to the manager in his decision-making process. In fact actual problem-solving may

require many skills and tools which are not available in the traditional economist’s. For example, knowledge of

accounting and of statistical concepts and methods, which are not taught in economics, can help the analyses to

apply more effectively the economic tools in a concrete situation. The problems of industrial management do not

neatly fall into one academic discipline or another. Rather they tend to out across different disciplines.

Managerial economics is pragmatic, it is concerned with analytical tools that are useful, that have proven

themselves in practice, or that promise to improve decision – making in the future. In the attempt to be practical it cuts

through many of the refinements of theory.

Managerial economies differs from other discipline in the field of economics in two important respects. First, it

is that portion of economics which has to do specifically with managerial decision making. Therefore, it makes a

selection from among all the theoretical tools available and those that are directly applicable, empirically based, and

thus testable. These qualifications do not mean that these tools are either easier to work with or to comprehend or

that they do not require atleast as high an order of economic know-how as the rest of economics.

SCOPE OF MANAGERICAL ECONOMIC

Haynes and others point out that y definition the scope of managerial economics does not extend to macro

economic theory and the economics of public policy an understanding of which is who essential for the manager. This

is because there is an important link between the two in so far as the decision at the firm level must take into account

the trends in the economy and the impact of a host of environmental factors. Hence in our decision we extend its

scope to macro economic theory also.

RELATIONS TO OTHER BRANCHES OF LEARNING

The simplest way to calrify the scope of field of study is to discuss its relation to other subjects. In this

connection it is easy to see that managerial economics has close connection with economics, the theory of decision-

making, operation research, statistics and accounting. The fully trained managerial economist integrates concepts

and methods form all of these disciplines, bringing them together to bear on managerial problems.

MANAGERIAL ECONOMICS AND ECONOMICS

Managerial economics has been defined as economics applied in decision-making. It is a special branch of

economics bridging the gap between abstract economic theory and managerial practice. The primary source of

concepts and analytical tools for managerial economics in micro-economic theory or what is popularly termed as

Marshallian economics concepts such as the elasticity of demand, marginal cost, the short and long runs, market

structures, etc. are all of great significance to managerial economics. Well-known model in price theory such as the

models for the monopoly price, the kinked demand theory and the models of price discrimination are also made use

of in managerial economics. Macro-economics aids managerial economics in the area of forecasting. Post-Keynesian

theory of income and employment has direct implications for forecasting general business conditions. Since the

End of Preview - Want to read all 136 pages?

Access Now

Unformatted Attachment Preview

BACHELOR OF COMMERCE (B.COM.,) PAPER – 2.1 MANAGERIAL ECONOMICS 1 UNIT – I CHAPTER - I SECTION - I Definition of Managerial Economics Managerial economics refers to those aspects of economics and its tools of analysis most relevant to the firm’s decision-making process. According to MeNair and Meriam, managerial economies consists of the use of economic models of thought to analyze business situations. Some writers consider managerial economics as the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management. The underlying idea of all these definitions is that managerial economics means economics applied in decision-making. So we may consider managerial economics as a special branch of economics bridging the gap between abstract theory and managerial practice. It may be pointed out here that effective decision-making at the firms’ level calls for a careful analysis of a choice between alternative courses of action. Economic theory offers a variety of concepts and analytical tools which can be of considerable assistance to the manager in his decision-making process. In fact actual problem-solving may require many skills and tools which are not available in the traditional economist’s. For example, knowledge of accounting and of statistical concepts and methods, which are not taught in economics, can help the analyses to apply more effectively the economic tools in a concrete situation ...
Purchase document to see full attachment