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Managerial Economics- Qustions

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Managerial Economics- Qustions
Q.No. 1: What is Managerial Economics.? Explain the nature and scope of Managerial Economics.?
Answer:

Managerial Economics generally refers to the integration of economic theory with business practice. While economics provides the tool which explain various concepts such as demand, supply, price, competition etc. Managerial economics applies these tools to the management of business, in this sense managerial economics is also understood to refer to business economics or applied economics.

Managerial economics lies on the border line of management and economics. It is a hybrid of two disciplines and it is primarily an applied branch of knowledge. Management deals with principles which help in decision making under uncertainty and improve effectiveness of organisation. Economics on the other hand provides a set of propositions for optimum allocation of scare resources to achieve the desired objectives.

Nature of Managerial Economics:

It is true that managerial economics aims at providing help in decision making by firms. For this purpose it draws heavily on the prepositions of micro economic theory. Note that micro economics studies the phenomenon at the individuals level and behavior of consumers, firms. The concepts of micro economics used frequently in managerial economics are elasticity, marginal cost, managerial revenue, market structure and their significance in primary policies. Some of these concepts however provide only the logical base and have to be modified in practice.

Micro economics assists firms in forecasting. Note that micro economics theory studies the economy at the aggregative level and ignores the distinguishing features of individual observations. For example micro economics indicates the relationship between the

• Magnitude of Investment and Level of National Income • Level of National Income and Level of Employment • Level of Consumption and National Income etc.

Therefore the postulates of microeconomics

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