![]() Theory of firm states that the primary aim of the firm is to maximize wealth. Managerial Economics is associated with the economic theory which constitutes Theory of Firm. It uses factual data for solution of economic problems. Econometrics is defined as use of statistical tools for assessing economic theories by empirically measuring relationship between economic variables. ![]() Managerial economics uses both Economic theory as well as Econometrics for rational managerial decision making. Managerial Economics is of great help in price analysis, production analysis, capital budgeting, risk analysis and determination of demand. It enables optimum utilization of scarce resources in such organizations as well as helps in achieving the goals in most efficient manner. But it can also be used to help in decision-making process of non-profit organizations (hospitals, educational institutions, etc). ![]() The use of Managerial Economics is not limited to profit-making firms and organizations. Managerial Economics applies micro-economic tools to make business decisions. While microeconomics is the study of decisions made regarding the allocation of resources and prices of goods and services, macroeconomics is the field of economics that studies the behavior of the economy as a whole (i.e. Study of Managerial Economics helps in enhancement of analytical skills, assists in rational configuration as well as solution of problems. It makes use of statistical and analytical tools to assess economic theories in solving practical business problems. It guides the managers in taking decisions relating to the firms customers, competitors, suppliers as well as relating to the internal functioning of a firm. Managerial Economics is a science dealing with effective use of scarce resources. It lessens the gap between economics in theory and economics in practice. The key of Managerial Economics is the micro-economic theory of the firm. It helps in formulating logical managerial decisions. It makes use of economic theory and concepts. Managerial Economics assists the managers of a firm in a rational solution of obstacles faced in the firms activities. ![]() Managerial Economics can be defined as amalgamation of economic theory with business practices so as to ease decision-making and future planning by management. ![]()
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