Scope AND Nature of Managerial Economics

1. Scope of Managerial Economics

2. Scope of Managerial Economics • Managerial Economics studies six important areas in management which may be called the ‘subject mater of Managerial Economics’

3. Demand Analysis and Forecasting

4. Demand Analysis and Forecasting • It analyses the various types of demand which enable the manager to arrive at a reasonable estimate of the demand for the products of this firm. • The main areas covered under demand analysis are demand determinants, demand distinctions and demand forecasting.

5. Cost and Production Function

6. Cost and Production Function • Cost and production analysis is vital for the efficient allocation of scarce resources • The major areas covered under cost and production analysis are Cost concepts and Classification, Cost-output Relations. Economies and Diseconomies of scale, and cost control.

7. Pricing Decisions, Policies and Practices

8. Pricing Decisions, Policies and Practices • Pricing is an important area in managerial economics • The success or failure of a firm depends on its pricing decisions • The main areas covered in this section are price determination in various market structure, pricing methods and price forecasting

9. Profit Management

10. Profit Management • Profit is the life blood of any organization. • An element of uncertainty exists about profits due to variations in costs and revenues • The important Areas covered under this topic are profit planning, profit management, profit forecast and profit measurement.

11. Capital Management

12. Capital Management • Capital management means planning and control of capital expenditure. • Capital measurement is done through capital budgeting, Cost of Capital, Rate of Return and Selection of projects are the important areas covered under Capital management.

13. Decision-Making

14. Decision-Making • It is the process of selecting a particular course of action from among a number of alternatives. • In arriving at a decision, the alternative courses of action available have to be weighted for acceptance of rejection

15. Nature (Characteristics) of Managerial Economics

16. Special Branch of Economics

17. Special Branch of Economics • Managerial Economics is a special branch of economics bridging the gap between theory and practice.

18. Micro- economic in Character

19. Micro- economic in Character • Managerial Economics draws heavily on the propositions of micro economic theory. • For example, demand concepts and theories of market structure are elements of micro economics which Managerial Economics uses.

20. Related to Macro-economics Also

21. Related to Macro-economics Also • Though, basically Managerial Economics is micro-economics in nature, it uses macro economic forecasting. • A proper understanding of the functioning of the economic system is of immense importance to the managerial economists in framing suitable policies. • Concepts like business cycles, national-income accounting etc are widely used in managerial economics.

22. Pragmatic (Realistic / Practical)

23. Pragmatic (Realistic / Practical) • Managerial Economics is pragmatic and essentially an applied branch of knowledge. • In economic theory many abstract issues are analyzed on the basis of assumptions which are highly unrealistic. • Managerial Economics avoids difficult abstract issues; it is mainly concerned with analytical tools that are useful to firms.

24. Elective in Nature

25. Elective in Nature • Managerial Economics is integrative or elective in nature. • It combines and synthesizes ideas and methods from various functional fields of business administration like accounting, production management, marketing and finance. • Thus it is multi-disciplinary in dimension.

26. Normative

27. Normative • Managerial Economists is prescriptive in character. • It recommends what should be done under various alternative conditions.