A good grasp of economics is vital for managerial decision making, for designing and understanding public policy, and to appreciate how an economy functions.
Why
Study Economics?
A good grasp of economics is
vital for managerial decision making, for designing and understanding public
policy, and to appreciate how an economy functions. The students need to know
how economics can help us to understand what goes on in the world and how it
can be used as a practical tool for decision making. Managers and CEO’s of
large corporate bodies, managers of small companies, nonprofit organizations,
service centers etc., cannot succeed in business without a clear understanding
of how market forces create both opportunities and constraints for business
enterprises.
Reasons For Studying
Economics:
1. It is a study of society and
as such is extremely important.
2. It trains the mind and enables one to think systematically about the
problems of business and wealth.
3. From a study of the subject it is possible to predict economic trends with
some precision.
4. It helps one to choose from
various economic alternatives.
Economics is the science of making
decisions in the presence of scarce
resources. Resources are simply anything used to produce a good or service to
achieve a goal. Economic decisions involve the allocation of scarce resources
so as to best meet the managerial goal. The nature of managerial decision
varies depending on the goals of the manager.
A Manager is a person who directs resources to achieve a stated goal
and he/she has the responsibility for his/her own actions as well as for the
actions of individuals, machines and other inputs under the manager’s control.
Managerial economics is the
study of how scarce resources are directed
most efficiently to achieve managerial goals. It is a valuable tool for
analyzing business situations to take better decisions.
Prof. Evan J Douglas defines
Managerial Economics as “Managerial Economics is concerned with the application
of economic principles and methodologies to the decision making process within
the firm or organization under the conditions of uncertainty”
According to Milton H Spencer and
Louis Siegelman “Managerial Economics is the integration of economic theory
with business practices for the purpose of facilitating decision making and
forward planning by management”
According to Mc Nair and Miriam, ‘Managerial
Economics consists of the use of economic modes of thoughts to analyze business
situations’.
Economics can be divided into two
broad categories: micro economics and macro economics. Macro economics is the study of the economic system as a whole. It is related to issues
such as determination of national income, savings, investment, employment at
aggregate levels, tax collection, government expenditure, foreign trade, money
supply etc., Micro economics focuses
on the behavior of the individuals, firms and their interaction in markets. Managerial economics is an
application of the principles of micro and macro economics in managerial
decision making.
The economic way of thinking
about business decision making provides all managers with a powerful set of
tools and insights for furthering the goals of their organization. Successful
managers take good decisions, and one of their most useful tools is the
methodology of managerial economics.
Nature
Of Managerial Economics:
1. Managerial economics is concerned
with the analysis of finding optimal solutions to decision making problems of
businesses/ firms (micro economic in nature).
2. Managerial economics is a
practical subject therefore it is pragmatic.
3. Managerial economics describes,
what is the observed economic phenomenon (positive economics) and prescribes
what ought to be (normative economics)
4. Managerial economics is based on
strong economic concepts. (conceptual in nature)
5. Managerial economics analyses the
problems of the firms in the perspective of the economy as a whole ( macro in
nature)
6. It helps to find optimal solution
to the business problems (problem solving)
Tags : Managerial Economics - The Fundamentals Of Managerial Economics
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