Managerial Economics and Operations Research : Mathematicians, statisticians, engineers and others teamed up together and developed models and analytical tools which have since grown into a specialised subject, known as operation research. Managerial economics has a close linkage with other disciplines and fields of study. The capital budgeting process takes different forms in different industries. It can be used by firms for planning, co-ordination and mobilisation of resources. Case 1-1, of economics for managers, economic role of government, general equilibrium, 1-2, 1-3, 1-4, 1-5, and 1-6 demand schedule and curve. Nature of Managerial Economics 5. He should be able to find out the relations between events and events and between events and environment.
The managerial economist has to undertake an economic analysis of competing firms. Is there any special emphasis for industrial promotion? Goods are bought and sold for cash as well as credit. Second, there must be an ability to pay. It is concerned with what decisions ought to be made. It may be or low depending upon number of factors. Techniques or Methods of Marginal Economics: 6 most important methods used by managerial economics to explain and solve business problems of a firm: i Scientific Method : Scientific method is a branch of study which is concerned with observed facts systematically classified and which includes trustworthy method for the discovery of truths. It provides a basis for managerial decision.
Economics has a logically consistent system of reasoning. Since the descriptive method wants to relate causality of the collected facts, it is necessary for it to make comparisons between one situation with the other and among different aspects of the same situation. There are three classes of accounts: i Personal account, ii Property accounts, and iii Nominal accounts. Yet another responsibility of the managerial economist is to bring about a synthesis of policies pertaining to production, investment, inventories, price and cost. The post-Keynesian aggregative theory has direct implications for forecasting general business conditions.
The other type of demand is called derived demand. Managerial economics does not deal with the whole economy as a unit of study. The role of the managerial economist is not to take decisions but to analyse, conclude and recommend. Several acts are performed to attain the objectives quantitative techniques are also used in decision making. In economic theory, we try to explain economic bahaviour: in business economics, we try to prescribe policies for a business manager which are most likely applied to achieve his objectives.
First, there must be value associated with acquiring and using the good or service. Managerial Economics is a science dealing with effective use of scarce resources. While economic theory abstracts from realities of the individual business units to build up its theories, managerial economics takes proper note of the particular economic environment in which a firm works. Features of Managerial Economics 1. It examines the interrelations among the various aggregates, and causes of fluctuations in them.
A good deal of imagination is required to apply the historical method. Neoclassical definition Scarcity definition- Robbins Growth Definition- Paul A Samuelson Modernde Moderndefinition finition Managerial Economics Managerial economics can be broadly defined as the study of economic theories, logic and tools of economic analysis that are used in the process proc ess of decision making. The managerial economics is constantly faced with the choice between models ignoring uncertainty and those that explicitly incorporate probability theory. Managers need to use these limited resources optimally. Economic Theory and Managerial Theory : Economic Theory is a system of inter-relationships.
At times, to analyse behaviour we use models. It studies economic aspects of the In managerial theory assumptions disappear due to practical situations problem 5. The main topics covered under cost and production analysis are production function, least cost combination of factor inputs, factor productiveness, returns to scale, cost concepts and classification, cost-output relationship and linear programming. Capital is invested it is employed for purchasing properties such as building, furniture, etc and for meeting the current expenses of the business. Alternatively, when the price of inputs shoots up, a firm is forced to work out a combination of inputs so as to ensure that this combination becomes the least cost combination.
The use of this material is free for learning and education purpose. Both the methods are interdependent and hold an equally important place in any scientific analysis. Economic theory makes a fundamental assumption of maximising profits as the basic objective of every firm. The aim of statistical method is to facilitate comparison, study relationships between the two phenomena and to interpret the complicated data for the purpose of analysis. Market demand function The market demand function for a product is a function showing the relation between the quantity demanded and the factors affecting the quantity of demand. It remains confined to descriptive hypothesis. But the demand curve expresses the relation between the price of a product and the quantity demanded, holding constant all the other factors affecting demand.
Queueing is a particular application of the statistical decision theory. It deals with Cost of capital, Rate of Return and Selection of projects. The empirical nature of managerial economics makes its scope wider. Business executives should take personnel decisions as an essential element. The understanding of the overall operation of the economic system is very useful to the managerial economist in the formulation of his policies. Definitions of basic concepts: a. Investments are made in the plant and machinery and buildings which are very high.
Business economics is prescriptive rather than descriptive in nature. For example, if the price of a box of matches or salt rises by 50%, it will. Statistics supplies many tools to managerial economics. About the Author Dan is a co-owner, founder and partner at two small businesses, both active in multimedia production in Los Angeles and Cincinnati. What other factors could have influenced the observed relationship? In other words, it is prescriptive rather than descriptive.