Definition and Scope of Management Economics
Definition and Scope of Management Economics
Managerial economics is viewed as a branch of economics which is applied to the problem of choice. It is the study of the distribution of resources available to a firm or a unit of management. This does not mean that managerial economics provides readymade or predetermined solutions to business problems. It provides conceptual techniques to help the managers of a business firm understand the problems.
Definitions of Management Economics
Following are the definitions of Management Economics by various authors
“Managerial economics is the application of economic models of thought to the analysis of business situations.”
-M.C. Nair and Merriam “Managerial economics is a cost theory for business executives.”
-Watson
“Managerial economics is concerned with the application of economic principles and their application to the decision making process in a firm or organization under conditions of uncertainty.”
-Prof. Ivan J. Douglas
“Managerial economics is a basic economic discipline which tries to understand and analyze the problems of decision making.”
-Hague
“Managerial economics is the integration of economic management theory with business practices for decision making and advance planning.” -Spencer and Segilman
Features of Managerial Economics
Different authors have defined the subject matter of managerial economics in different ways. The main features or elements of managerial economics are as follows-
1. It is a macro or micro economics- Managerial economics is a micro economics. Micro means that which is related to a particular firm. In managerial economics, the problems of a business firm are studied. It is not related to the entire economy.
2. Goal based- Managerial economics is goal based economics. It deals with how decisions should be taken by managers to achieve organizational goals.
3. Practical- Managerial economics is practical. It focuses on the entire situation in which decisions are taken, leaving aside the difficult issues of economic theory.
4. Conceptual and physical- Managerial economics is both conceptual and physical. In this, many quantitative techniques are used to understand the nature of the problem. It provides to understand or achieve it.
5. Related to decision making- Management economics is an important tool for decision making. Resources can be divided into many different choices. It helps in taking decisions regarding division so that maximum output can be obtained from the available resources. Micro or macro economics is also useful for management economics. Because it provides a good understanding of the business environment. Various external forces like business cycles, national income accounts, economic policies, government tax related, foreign trade etc. play an important role in this regard.
