0Managerial Economics is art and science, which helps in the decision making of:
1) what?
2) how?
3) and for whom to produce?
Nature:
1) it is science and art: science because it integrates the use of tools mathematics, statistics, and econometrics with economic theories to achieve desired goals.
It is an art as it involves the practical application of economic theories for the achievement of objectives.
2) Relies on microeconomics: business economics is mainly concerned with the achievement of objectives of a firm to ensure its long-term survival and profitability. Since it is concerned with the growth and survival of an individual business unit, it is based on microeconomics.
3) incorporates features of macroeconomics: though business economics/ managerial economics is based on microeconomics. It still has some elements of macroeconomics as a business unit can not exist in isolation. It is still affected by government policies, general price levels, income and employment levels, taxation, availability of resources, market regulations, etc.
4) Pragmatic (practical) in approach: Business economics tackles the possible problems a firm/ business faces in the real world (positive economics). It is different from microeconomics. In this aspect, as microeconomics is abstract and purely theoretical and analyses economic phenomena under unrealistic assumptions (normative).
5) Interdisciplinary: it incorporates the tools of multiple disciplines such as mathematics, statistics, finance, econometrics, management theory, etc.
SCOPE OF MANAGERIAL ECONOMICS
- Demand analysis and forecasting
- Profit management
- Capital management
