Managerial economics

Managerial economics deals with the application of the economic concepts, theories, tools, and methodologies to solve practical
problems in a business. It helps the manager in decision making and acts as a link between practice and theory".[1] It is sometimes
referred to as business economics and is a branch of economics that applies microeconomic analysis to decision methods of
businesses or other management units.

As such, it bridges economic theory and economics in practice.[2] It draws heavily from quantitative techniques such as regression
analysis, correlation and calculus.[3] If there is a unifying theme that runs through most of managerial economics, it is the attempt to
optimize business decisions given the firm's objectives and given constraints imposed by scarcity, for example through the use of
operations research, mathematical programming, game theory for strategic decisions,[4] and other computational methods.[5]

Contents
Overview
Scope
Demand decision
See also
Journals
Notes
References
External links

Overview
Managerial decision areas includes:

assessment of investible funds

selecting business area
choice of product.
determining optimum output.
sales promotion.
Almost any business decision can be analyzed with managerial economics techniques, but it is most commonly applied to:

Risk analysis – various models are used to quantifyrisk and asymmetric information and to employ them indecision
rules to manage risk.[6]
Production analysis – microeconomic techniques are used to analyzeproduction efficiency, optimum factor
allocation, costs, economies of scale and to estimate the firm's cost function.
Pricing analysis – microeconomic techniques are used to analyze variouspricing decisions including transfer pricing,
joint product pricing, price discrimination, price elasticity estimations, and choosing the optimum pricing method.
Capital budgeting – investment theory is used to examine a firm'scapital purchasing decisions.[7]
At universities, the subject is taught primarily to advanced undergraduates and graduate business students. It is approached as an
integration subject. That is, it integrates many concepts from a wide variety of prerequisite courses. In many countries it is possible to
read for a degree in Business Economics which often covers managerial economics, financial economics, game theory, business
forecasting and industrial economics.
Scope
Managerial economics to a certain degree is prescriptive in nature as it suggests course of action to a managerial problem. Problems
can be related to various departments in a firm like production, accounts, sales, etc.

(a) Operational issues

1. Demand decision
2. Production decision
3. Theory of exchange or price theory
4. All human economic activity
(b) Environmental issues

1. Nature and trend of domestic business/ international environment

2. nature and impact of social costs and government policy

Demand decision
Demand is the willingness of potential customers to buy a commodity. It defines the market size for a commodity, and at a
disaggregated level the composition of the customer base. Analysis of demand is important for a firm as its revenue, profits, and
income of its employees depend on it.[8]

See also
Business economics
Personnel economics
Management science

Journals
Computational Economics. Aims and scope.
Journal of Economics & Management Strategy
. Aims and scope.
Managerial and Decision Economics

Notes
1. W. B. Allen, Managerial EconomicsTheory, Applications, and Cases, 7th Edition. Norton.Contents (http://books.wwn
orton.com/books/detail-contents.aspx?ID=13385).
2. • William J. Baumol (1961). "What Can Economic Theory Contribute to Managerial Economics?," American
Economic Review, 51(2), pp. 142 (https://www.jstor.org/stable/1914477)-46. Abstract (http://www.mendeley.com/rese
arch/economic-theory-contribute-managerial-economics-1/) .
• Ivan Png and Dale Lehman (2007, 3rd ed.).Managerial Economics. Wiley. Description (http://www.wiley.com/Wile
yCDA/WileyTitle/productCd-EHEP001017.html) and chapter-preview links. (https://books.google.com/books?id=Sec
BA0uR71MC&pg=PR5&lpg=PP1&dq=%22)
• M. L. Trivedi (2002). Managerial Economics: Theory & Applications
, 2nd ed., Tata McGraw-Hill. Chapter-preview
links (https://books.google.com/books?id=P A5FalH0CeAC&printsec=find&pg=PR11#v=onepage&q&f=false) .
3. NA (2009). "managerial economics,"Encyclopædia Britannica. Cached online entry. (http://google.com/search?q=ca
che:JYnNGBdLTqQJ:www.britannica.com/EBchecked/topic/361242/managerial-economic s+%%22&hl=en&ct=clnk&
cd=8&gl=us)
4. • Carl Shapiro (1989). "The Theory of Business Strategy
," RAND Journal of Economics, 20(1), pp. 125 (https://www.j
stor.org/pss/2555656)-137.
• Thomas J. Webster (2003). Managerial Economics: Theory and Practice, ch. 13 & 14 (https://books.google.com/b
 ooks?id=GugD63f7eBgC&printsec=find&pg=PR13#v=onepage&q&f=false)
, Academic Press. Description. (http://boo
ks.emeraldinsight.com/display.asp?K=9780127408521)
5. For a journal on the last subject, seeComputational Economics, including an Aims & Scopelink (https://www.springe
r.com/economics/economic+theory/journal/10614) .
6. • James O. Berger (2008)."statistical decision theory ," The New Palgrave Dictionary of Economics, 2nd Edition.
Abstract (http://www.dictionaryofeconomics.com/article?id=pde2008_S000251&edition=current&q=) .
• Keisuke Hirano (2008). "decision theory in econometrics,"The New Palgrave Dictionary of Economics, 2nd
Edition. Abstract (http://www.dictionaryofeconomics.com/article?id=pde2008_D000244&edition=current&q=Computa
tional%20economics&topicid=&result_number=19) .
• Vassilis A. Hajivassiliou (2008). "computational methods in econometrics,"The New Palgrave Dictionary of
Economics, 2nd Edition. Abstract. (http://www.dictionaryofeconomics.com/article?id=pde2008_C000559&edition=cur
rent&q=&result_number=1)
7. • Trefor Jones (2004). Business Economics and Managerial Decision Making , Wiley. Description (http://www.wiley.co
m/WileyCDA/WileyTitle/productCd-EHEP000988.html) and chapter-preview links (https://books.google.com/books?i
d=qr7TORfhBwQC&printsec=find&pg=PR7#v=onepage&q&f=false).
• Nick Wilkinson (2005).Managerial Economics: A Problem-Solving Approach , Cambridge University Press.
Description (http://www.cambridge.org/gb/knowledge/isbn/item1170271/?site_locale=en_GB)and preview. (https://b
ooks.google.com/books?id=O-Fv7B4J-6EC&printsec=find&pg=PR5#v=onepage&q&f=false)
• Maria Moschandreas (2000). Business Economics, 2nd Edition, Thompson Learning.Description (https://books.g
oogle.com/books?id=ncVfjhTULyAC&printsec=find&pg=PA410#v=onepage&q&f=false)and chapter-preview links (ht
tps://books.google.com/books?id=ncVfjhTUL yAC&printsec=find&pg=PR5#v=onepage&q&f=false) .
8. Prof. M.S. BHAT, and mk RAU.Managerial economic and financial analysis.Hyderabad.
ISBN 978-81-7800-153-1

References
Alan Hughes (1987). "managerial capitalism,"The New Palgrave: A Dictionary of Economics
, v. 3, pp. 293–96.
Edward Lazear (2008). "personnel economics,"The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.
Keith Weigelt (2006). Managerial Economics
Elmer G. Wiens The Public Firm with Managerial Incentives
Khan Ahsan (2014). "Managerial Economics and Economic Analysis", 3rd edition, Pakistan.
arya sri."managerial economics " :MEFA . (2015).

External links
http://www.edushareonline.in/Management/eco%20new.pdf
http://www.swlearning.com/economics/hirschey/managerial_econ/chap01.pdf

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