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Assignment 1 Economics

Managerial economics applies economic theory and principles to business decision making in order to help managers make optimal choices in an environment of scarce resources and uncertainty. It bridges the gap between abstract economic theory and practical business management by using concepts like profit, demand, cost, pricing, production, and competition to analyze problems and throw light on issues facing business executives. The primary functions of management are decision making and forward planning, and managerial economics aids this process by considering how economic analysis can be applied to solve business problems.

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2K views4 pages

Assignment 1 Economics

Managerial economics applies economic theory and principles to business decision making in order to help managers make optimal choices in an environment of scarce resources and uncertainty. It bridges the gap between abstract economic theory and practical business management by using concepts like profit, demand, cost, pricing, production, and competition to analyze problems and throw light on issues facing business executives. The primary functions of management are decision making and forward planning, and managerial economics aids this process by considering how economic analysis can be applied to solve business problems.

Uploaded by

mohinig88
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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NATIONAL INSTITUTE OF FASHION TECHNOLOGY


GANDHINAGAR



Managerial Economics
ASSIGNMENT I








Submitted by:
JISHITHA.M
MFM-1




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2) Justify - Managerial Economics is economics applied in decision making.

Managerial economics is a discipline which deals with the application of economic theory to
business management. Managerial economics and Business economics are two terms, which at
times have been used interchange. Of late, however, the term Managerial Economic has become
more popular and seems to displace progressively the term Business Economics. It deals with the
use of economic concepts and principles of business decision making.

Definition of Managerial Economics:
Managerial Economics is economics applied in decision making. It is a special branch of
economics bridging the gap between abstract theory and managerial practice. Haynes,
Mote and Paul.
Nature of Managerial Economics:
The primary function of management executive in a business organization is decision
making and forward planning.
Decision making and forward planning go hand in hand with each other. Decision
making means the process of selecting one action from two or more alternative courses of
action. Forward planning means establishing plans for the future to carry out the decision
so taken.
The problem of choice arises because resources at the disposal of a business unit (land,
labor, capital, and managerial capacity) are limited and the firm has to make the most
profitable use of these resources.
The decision making function is that of the business executive, he takes the decision
which will ensure the most efficient means of attaining a desired objective, say profit
maximisation. After taking the decision about the particular output, pricing, capital, raw-
materials and power etc., are prepared. Forward planning and decision-making thus go on
at the same time.
A business managers task is made difficult by the uncertainty which surrounds business
decision-making. Nobody can predict the future course of business conditions. He
prepares the best possible plans for the future depending on past experience and future
outlook and yet he has to go on revising his plans in the light of new experience to
minimise the failure. Managers are thus engaged in a continuous process of decision-
making through an uncertain future and the overall problem confronting them is one of
adjusting to uncertainty.
In fulfilling the function of decision-making in an uncertainty framework, economic
theory can be, pressed into service with considerable advantage as it deals with a number
of concepts and principles which can be used to solve or at least throw some light upon
the problems of business management. E.g. are profit, demand, cost, pricing, production,
competition, business cycles, national income etc. The way economic analysis can be
used towards solving business problems, constitutes the subject-matter of Managerial
Economics.
Thus in brief we can say that Managerial Economics is both a science and an art


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Managerial economics and decision making

Economic theory is of considerable help to managers in fulfilling the function of
decision-making in an uncertainty frame-work.
This is because economics deals with a number of concepts and principles relating to
profit, demand, cost, supply, pricing, production, competition,, business cycles, national
income, etc.,
This help is enhanced when economics is aided by disciplines like accounting, statistics,
and mathematics. The two together aid the process of business decision making and
planning
The subject-matter of managerial economics revolves around as to how economic
analysis can be used in solving business problems




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