The primary function is to make the most profitable use of resources which are limited such as labor, capital, land etc. It involves the complete course of selecting the most suitable action from two or more alternatives. The most important function in managerial economics is decision-making. ![]() Macroeconomics models and their estimates are used by the government to assist in the development of economic policy. Businesses have finite human and financial resources managerial economic principles can aid management decisions in allocating these resources efficiently. Microeconomics and managerial economics both encourage the use of quantitative methods to analyze economic data. ![]() Macroeconomists study aggregate indicators such as GDP, unemployment rates to understand the functions of the whole economy. It is more limited in scope as compared to microeconomics. Managerial economics applies microeconomic theories and techniques to management decisions. Macroeconomics deals with the performance, structure, and behavior of an economy as a whole. Microeconomics studies the actions of individual consumers and firms managerial economics is an applied specialty of this branch. Spencer and Siegelman have defined the subject as “the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.” Micro, Macro, and Managerial Economics Relationship To quote Mansfield, “Managerial economics is concerned with the application of economic concepts and economic analysis to the problems of formulating rational managerial decisions. The subject offers powerful tools and techniques for managerial policy making. It helps in covering the gap between the problems of logic and the problems of policy. ![]() Managerial economics is a discipline that combines economic theory with managerial practice. In this way, managerial economics is considered as economics applied to “problems of choice’’ or alternatives and allocation of scarce resources by the firms. Economic analysis is required for various concepts such as demand, profit, cost, and competition. A close interrelationship between management and economics had led to the development of managerial economics.
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