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Managerial Economics

Managerial Economics is the science of directing scarce resources to manage effectively. Whenever resources are scarce, a manager can make more effective decisions by applying the discipline of managerial economics. These may be decisions regarding customers, suppliers, competitors or the internal workings of the organization. It does not matter whether the setting is a business, not for profit organization or home. In all these settings, managers must make the best use of scarce resources.

Scope of Managerial Economics

Managerial economics must be distinguished from microeconomics and macroeconomics. Microeconomics is the study of individual economic behavior where resources are costly. It addresses issues such as how consumers respond to changes in prices and income and how businesses decide on employment and sales. Microeconomics also extends to such issues as how voters choose between political parties and how governments should set taxes. Managerial economics has a limited scope as it is the application of microeconomics to managerial issues. Managerial economics consists of three branches namely: Competitive markets, market power and imperfect markets.

By contrast, the field of macroeconomics focuses on aggregate economic variables. Macroeconomics addresses such issues as how a cut in interest rates for example can affect the inflation rate and how a depreciation of a currency will affect unemployment, exports and imports.

While it is certainly true that the whole economy is made up of individual consumers and businesses, the study of macroeconomics often considers economic aggregates directly rather than as the aggregation of individual consumers and businesses.

Some issues overlap in both microeconomics and macroeconomics. For example, energy has such an important role to play in the economy that changes in the price of energy have both macroeconomic and microeconomic effects. If the price of oil were to rise by 10% , it would trigger increases in other prices and hence generate price inflation, which is a macroeconomic effect. The increase in the price of oil would also have microeconomic effects, for instance, power stations might switch to other fuels, drivers might cut back on using their cars and oil producers might open up new fields.

The fundamental premise of managerial economics is that individuals share common motivations that lead them to behave systematically in making economic choices. If economic behavior is systematic, then it can be studied. Managerial economics proceeds by constructing models of economic behavior. An economic model, is a concise description of behavior and outcomes. By design, the model omits considerable information so as to focus on a few key variables. Economic models are abstractions, like maps; a map with too much detail is confusing rather than helpful. Models are constructed by inductive reasoning. For instance, inductive reasoning suggests that the demand for new software increases with the amount that the publisher spends on advertising. We can build a model in which the demand for a product depends on advertising expenditure. The model should then be tested with accrual empirical data. If the tests support the model.

In managerial economics, many analyses resolve to a balance between the marginal values of two variables. Accordingly, it is important to understand the concept of marginal value. Generally, the marginal value of a variable is the change in the variable associated with a unit increase in a driver. By contrast, the average value of a variable is the total value of the variable divided by the total quantity of a driver.

 

Albert Frank is a Phd holder from an Ivy League university and has been with www.HelpWIthAssignment.com for the last seven years. He is engaged in providing Online tutoring and assignment help services to students from K-12, college and University.

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Managerial economics assignment help by Tutorhelpdesk

Managerial economics is that branch of economics that deals with managerial decision making. Managerial Economics and Business economics are the two terms, which, at times have been used interchangeably. But somehow the term Managerial Economics has become more popular and seems to displace progressively the term Business Economics.

The major role and responsibility of a management executive in a business organization is decision making and planning. Decision Making means the process of selecting one course of action from two or more alternative courses of action whereas on the other hand planning means laying down plans and policies for the future. The opportunity of making the choice arises because resources which are required for production of goods and services such as capital, land, labour and management are limited in nature and can be employed in alternative uses. The decision making function thus becomes one of making choices or decisions that will provide the most efficient means of attaining a desired end, say, profit maximization. Once decision is made about the particular goal to be achieved, plans as to production, pricing, capital, raw materials, labour, etc., are prepared. Forward planning thus goes hand in hand with decision making.

A major condition of the business under which it operates, work and take decisions, is uncertainty. And this fact of uncertainty not only makes the function of decision making and forward planning complicated but adds a different dimension to it. If we had full knowledge of the future then, plans can be formulated without committing any error and hence without any need for subsequent revision.

In the real world, however, the business manager do not possess complete information and the estimates about future are predicted to the best of their knowledge. As plans are implemented over time, many real situations, problems and facts comes to our knowledge and with respect to these changes, plans may have to be revised, and a different course of action adopted. Managers are thus engaged in a continuous process of decision making through an uncertain future and the overall problem confronting them is one of adjusting to uncertainty.

In achieving the function of decision making in an uncertain environment, economic theories can be put into the best service with considerable advantage. Economic theories talks about number of concepts and principles which relate to business directly, for example, to profit, demand, cost, pricing, production, competition, business cycles, national income, etc., which takes help by many other disciplines like Accounting, Finance, Statistics and Mathematics can be used to solve or at least throw some light upon the problems of business management. The manner in which the analysis of economics theories can be used as a tool to solve business problems, is known as Managerial Economics.

In approximately all management courses Managerial economics is studied as a subject so that potential business manager’s can come to know about economic theories and they can take better decisions.

As we know management field is open to all commerce and non-commerce students so economics seems to be a difficult subject for those who are studying it for the first time. So tutorhelpdesk is one company which provides help on all topics of economics including micro economics, macro economics, managerial economics etc. for any kind of help on economics feel free to contact tutorhelpdesk.

Article is written by Ben marsh economics tutor. For on any kind of Managerial economics assignment help or economics homework help feel free to contact.

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