Assignment no: 509
Managerial economics refers to the application of economic theory and the tools of analysis of decision science to examine how an organization can achieve it aims or objectives most efficiently.
Importance of managerial economics
Managerial Decision Problems
Application of economic theory
and decision science tools to solve
managerial decision problems
OPTIMAL SOLUTIONS TO
MANAGERIAL DECISION PROBLEMS
Managerial Decision Problems
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Business managers, forever, face a need to adapt to changes in the business environment. The business world has to be dynamic to face the changing trends in demand. This dynamism pervades decision-making and necessitates the integration of managerial economics into the business environment. Managerial economics has given rise to the emergence of a new approach in decision-making known as corporate strategy. Business Corporation’s work with a given set of corporate goals and objectives against the background of a set of assumptions about the company’s economic, competitive, regulatory, factor-supply, technological and international environment. Strategic planning is a three-fold problem viz a portfolio problem, an investment problem and a strategy selection problem and a strategy selection problem. The portfolio problem pertains to which business should the company adopt. The investment problem pertains to the level of investment to be made by each business. The strategy selection problem pertains to the specific financial, marketing and production strategies to be followed by each business firm. Thus the integration of managerial economics in decision-making has given rise to corporate economics. Managerial economics sharpens the business acumen. An ability to analyse problems logically and clearly helps to make good decisions. Managerial economics provides necessary tools to the management in its decision-making process. Managerial economics has emerged as a special branch of knowledge allied to economics to enrich the decision makers at various levels of firms operations. Concepts in the area of demand, costs, sales etc. help to apply theories to the solution of problems in day-to-day business activity. Managerial economics with the knowledge of operations research provides the professional managers with the required tools and models to solve problems in a more scientific way.
Managerial decision problems
Management has to face Decision Problems like, what should be the price of the product? , What should be the size of the plant to be installed? , How many workers should be employed? , What is the optimal level of inventories of finished products, raw material, spare parts, etc.? , What should be the cost structure?
So the Product selection, output and pricing, internet strategy, organization design, product development and promotion strategy, worker hiring and training, investment and financing are very important problems in management.
To solve the problems Managerial economist has to be made decisions on, Production scheduling, Demand Estimation and Forecasting, Analysis of market to determine nature and extent of competition, Pricing problems of industry, Assist business planning process, Advising on investment and capital budgeting, Analyzing and forecasting environmental factors
Managerial economics refers to the application of economic theory and the tools of analysis of decision science to examine how an...