SCOPE

Managerial economics constitute the following subject

matters:

Demand Analysis & Forecasting

Choice of Input Mix & Technology
Pricing & Market Management
Profit Management
Investment decisions
Sales Promotion and Market Strategy
SCOPE
Techniques used with Managerial Economics for
decision making.

Managerial Economics & Traditional Economics

Managerial Economics & Operational Research
Managerial Economics & Mathematics
Managerial Economics & Statistics
Managerial Economics & Theory of Decision
Making
Managerial Economics & Traditional
Economics
Basic concepts and analytical tools are applied to
business situation.
Both deals with scarcity of resource and resource
allocation.
Main contributions are:
a) understanding market conditions and general
economic environment.
b) understanding & analyzing resource allocation
problems.
Economic analysis for technical & economic efficiency.
Managerial Economics &
Operations Research

Both concerned with making effective decision for

firm’s objectives.
Model building :
- economics' models are confined to broad
economic decision making whereas OR models are
job-oriented and situational. Eg: queuing, linear
programming.
OR is expensive and time consuming but provides
accurate solutions.
Managerial Economics &
Operations Research
Limitations of OR
-- can only be used for problems of where OR’s
use can generate potential savings.
--for small problems, OR solutions must be
applicable to other similar problems.
 Managerial economics has come up with tools for
instant OR.
Managerial Economics &
Mathematics
Managerial economics is both conceptual and metrical.
Metrical: estimate & predict economic factors for decision
making and forward planing.
Mathematics posses concepts and allows operations- no
managerial equivalent in descriptive analysis.
Geometry, algebra, calculus are main branches used.
Logarithms, vectors, determinants are concepts used.
Managerial Economics & Statistics

Managerial economics aims at Quantifying past

economic activity and predict future course .
Statistics can deal with uncertainty principle.
Managerial economics uses probability to solve
problems of decision making.
Managerial Economics &
Theory of Decision Making
Economic theory is based on assumption of
single goal - profit maximization.
Decision making looks for solutions that
balance conflicting objectives.
Economic theory serves for simple & situations
with clear cut objectives.
Theory of decision making serves for complex
problems with multiple goals.
Conclusion

Managerial economics integrates ideas from

various specialized functions and disciplines into
an overall point of view – the perspective of a good
manager.