Managerial Economic

Topic 1
Nature and Scope of Managerial Economics
Q-1 Managerial Economics is often said to help the business student
integrate the Knowledge gained in other courses. How is this integration
accomplished?
Ans: Managerial economics may be defined as the “ The application of
economic theory and the tools of decision science to examine how an
organization can achieve its aims or objectives most efficiently”

(1) Relationship to economic theory

Study of economics is made from two perspectives
(a) Macro economic (b) Micro economics
In macro economics we study the economy as a whole. In this type of analysis
we discuss about national income, inflation, unemployment etc.
In micro economics we discuss about the individual units of the economy
like individual and market demand, consumer behavior and equilibrium of firm. In
managerial economics the theories about firm are the most important because
decision are made about the functioning of firms. Beside theory of firm,
information about the behavior of consumer is also important for estimation of
demand for the product of the firm. As firm operates in economy therefore
changes in structure and nature of economy is also important for managerial
decision making. We can, therefore say, that economic theories are very
important for managerial decision making.

(2) Relationship to decision science

The decision sciences like mathematical tools and econometric techniques are
important for deriving information about the market data interpretation and for
taking accurate decision. Market date collection, demand analysis, cost
calculation and profit estimations are very much based upon decision science.
Therefore “ Managerial economics” refers to the application of economic
theory and decision science tools to find the optimal solution to managerial
decision problems

Note Students must explain various topics of economics and explain relation with IT
and International business