Nature of Managerial Economics

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Nature of Managerial Economics Managerial Economics and Business economics are the two terms, which, at times have been used interchangeably.. The prime function of a management executive in a business organization is decision making and forward planning. Decision Making means the process of selecting one action from two or more alternative courses of action whereas forward planning means establishing plans for the future. In fulfilling the function of decision making in an uncertainty framework, economic theory can be pressed into service with considerable advantage. Economic theory deals with a number of concepts and principles relating, for example, to profit, demand, cost, pricing production, competition, business cycles, national income, etc., which aided by allied disciplines like Accounting. Statistics and Mathematics can be used to solve or at least throw some light upon the problems of business management. The way economic analysis can be used towards solving business problems. Constitutes the subject matter of Managerial Economics. Definition of Managerial Economics Managerial Economics can be defined as the discipline which deals with the application of economic theory to business management. Characteristics of Managerial Economics 1. Managerial Economics is micro-economic in character. 2. Managerial Economics largely uses that body of economic concepts and principles, which is known as 'Theory of the firm' or 'Economics of the firm'. In addition, it also seeks to apply Profit Theory, which forms part of Distribution Theories in Economics. 3. Managerial Economics is pragmatic. It avoids difficult abstract issues of economic theory but involves complications ignored in economic theory to face the overall situation in which decisions are made.. 4. Managerial Economics belongs to normative economics rather than positive economics.
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