What Is Managerial Economics?

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Review of Subject Managerial decisions are an important component in achieving the objectives of the organization. The success or failure of a business depend upon the decisions made by managers (Jurina, 2011). Today’s increasing complexity in the world of business brought forth greater challenges for both the firm and its managers. The rapid rate of technological and digital advance as well as greater focus product innovation and processes that influence marketing and sales techniques have contributed to the increasing complexity in the business environment. This complex environment together with a global market where input and product prices are continuing to fluctuate and remain volatile. Such changing environments creates a pressing need…show more content…
According to McGutgan and Moyer: “Managerial economics is the application of economic theory and methodology to decision-making problems faced by both public and private institutions”. McNair and Meriam: “Managerial economics consists of the use of economic modes of thought to analyze business situations”. Spencer and Siegelman: Managerial economics is “the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management”. Haynes, Mote and Paul: “Managerial economics refers to those aspects of economics and its tools of analysis most relevant to the firm’s decision-making process”. Managerial economics deals with the use of economics’ principles, techniques and concepts to managerial problems of business and industrial enterprises. Managerial economics helps firms in formulating logical tools and techniques for managerial policy and decisions making. Furthermore, it helps in narrowing the gap that exists between economics in theory and in practice and guides managers in making decisions that are related to customers, competitors, suppliers and internal functioning of a firm. It also encourages the use of statistical and analytical tools in solving practical business problems by…show more content…
Therefore, to achieve this objective, managers have to make choices in decision-making, which is the process of selecting a course of action from two or more alternatives (Weihrich & Koontz; 1994, 199). A sound decision making requires extensive knowledge of economic theory and the tools of economic analysis, that are directly related in the process of decision-making. Since managerial economics is concerned with such economic theories and tools of analysis, it is very relevant to the managerial decision-making process. According Spencer and Siegelman managerial economics accommodates traditional theoretical concepts to the actual business behavior and conditions by amalgamating tools, techniques, models as well as theories of traditional economics with actual business practices and environment in which a firm operates. According to Edwin Mansfield, “Managerial Economics attempts to bridge the gap between purely analytical problems that intrigue many economic theories and the problems of policies that management must
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