MEANING AND DEFINITION OF

MANAGERIAL ECONOMICS

Manoj YADAV AIT Varanasi

“Managerial Economics is the application of economic theory and methodology to business administrative decision making.”

Definitions………….

“Managerial Economics is the integration economic theory with business practice for the purpose of facilitating decision making and forward planning management.”

-Milton H Spencer and Siegelman

“Managerial Economics is Economics applied to decision making it is special branch of economics building the gap between abstract theory and managerial practice.”

-Hayns, Mote and parul

“Managerial Economics include the portion of economics known as the theory of firm, a body of theory which can be of considerable assistance to the business in his decision making.”

-Norman F Durtly

“Managerial Economics is the use of economic mode of thought to analyse business situation.”

-Malcom P Mc Nair and Richard S Merium

“Price theory in the service of business executive.”

-Watson

Definitions continued………….

“Managerial Economics is the application of economic theory and methodology to business administration practice.”

-E.F.Brigham and J.F.Pappas

“A judgmental academic subject which seeks to understand and analyse the problem of business decision making.”

- D.C.hange

“The purpose of Managerial Economics is show how economics analysis can be used in formulating business policies.”

-Joel Dean

“Managerial Economics attempts to bridge the gap between purely analytical problem that intrigue many economic theorists and the problem of policies that management must face.”

-Edwin Mansfield

Definitions and conclusion………….

“Managerial Economics is that applied aspect of economics which studies a business firm and help the management in decision making for tackling the problems of firm.”

-Bates and Pakistan

“Managerial Economics applies the principle and methods of economics to analyze the problems faced by management of business, or other type of organization and to help find solutions that analyze best interests of such organization.”

-Davis and Chand

Thus as a summary we can say that

“Managerial Economics uses micro economic theories for decision making on analytical problems in any type of organization.”

Nature/ Chief characteristics

Managerial Economics is micro economics in character.

It takes help of macro economics to understand the environment.

It is normative (What ought to be) rather than positive (what is / what will be).

It is conceptual and metrical (Mathematical).

Its contents are based on “theory of firm”.

It helps in making wise decision.

It is pragmatic (Practical).

Scope

In early period the subject matter of Managerial Economics was constituted by only:

Theory of firm. Demand analysis and forecasting. Production and cost. Competition. Pricing and output. Profit. Investment and capital budgeting. Product policy, Sales promotion and market strategy.

But lately the development of Mathematical, Statistical and operational Research techniques for analyzing situations faced by the Managerial Economist prompted their use in decision making.

Significance/Importance

It makes relation between Economic theories and actual business condition.

It helps in understanding general and particular environment.

It helps in decision making and advance planning.

Prediction of profit and production cost, price, Capital and other relevant economic quantities.

Helps in estimating relationship between factors like Demand & supply, Cost & price.

Role/function/responsibility

Major role Of

Managerial Economics

Decision MakingOr

Specific Decision

Processing InformationOr

General Task

As per Sir K. J. Alexander & G. K. Alexander Specific functions are:Sales forecasting.

1. Industrial market research.2. Economic analysis of competitors.3. Pricing problems.4. Capital projects.5. Production programmes.6. Investment analysis.7. Forecasting.8. Advise on trade public relation.9. Advise on foreign exchange.10. Advise on primary commodities.11. Economic analysis of agriculture.12. Analysis of under-developed economics13. Environment forecasting.

General tasks: is divided in to two parts i.e.

A) External factorsB) Internal factors

External factors:

General economic condition of economy.Demand for the product.Input cost.Market conditions.Expansion of market shareGovt. economic policies.

Internal factors:

a) Recognize a problem Or See the way for growth b) Use readily available information