Managerial economics
Managerial economics
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Managerial economics

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Managerial economics

Managerial economics is a branch of economics involving the application of economic methods in the organizational decision-making process. Economics is the study of the production, distribution, and consumption of goods and services. Managerial economics involves the use of economic theories and principles to make decisions regarding the allocation of scarce resources. It guides managers in making decisions relating to the company's customers, competitors, suppliers, and internal operations.

Managers use economic frameworks in order to optimize profits, resource allocation and the overall output of the firm, whilst improving efficiency and minimizing unproductive activities. These frameworks assist organizations to make rational, progressive decisions, by analyzing practical problems at both micro and macroeconomic levels. Managerial decisions involve forecasting (making decisions about the future), which involve levels of risk and uncertainty. However, the assistance of managerial economic techniques aid in informing managers in these decisions.

Managerial economists define managerial economics in several ways:

The two main purposes of managerial economics are:

The core principles that managerial economist use to achieve the above purposes are:

In order to optimize economic decisions, the use of operations research, mathematical programming, strategic decision making, game theory and other computational methods are often involved. The methods listed above are typically used for making quantitate decisions by data analysis techniques.

The theory of Managerial Economics includes a focus on; incentives, business organization, biases, advertising, innovation, uncertainty, pricing, analytics, and competition. In other words, managerial economics is a combination of economics and managerial theory. It helps the manager in decision-making and acts as a link between practice and theory. Furthermore, managerial economics provides the tools and techniques that allow managers to make the optimal decisions for any scenario.

Some examples of the types of problems that the tools provided by managerial economics can answer are:

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