Characteristics/ Features of Managerial Economics


Different authorities on the subject matter of managerial economics have given differently. However, the following characteristics seem to these viewpoints as:
  1. Micro economic character: Managerial economics is micro economic in character because it is a unit of study i.e. firm. It only deals the problems of firms but not deal with the entire economy as a unit of study. However, it takes the help of macroeconomic to understand and adjust to the environment in which the firm operates.
  2. Choice and Allocation: Managerial economics is concerned with decision-making of economic nature. This implies that managerial economics deals with identification of economic choices and allocation of scarce resources.
  3. Goal oriented: Managerial economics is goal-oriented and prescriptive. It deals with how decisions should be formulated by managers to achieve the organizational goals.
  4. Conceptual and Metrical: Managerial economics is both ‘Conceptual and Metrical’. An intelligent application of quantitative techniques to business presupposes considered judgment and hard and careful thinking about the nature of the particular problem to be solved. Managerial economics provides necessary conceptual tools to achieve this. Moreover, it helps the decision-maker by providing measurement of various economic entities and their relationships. This metrical dimension of managerial economics is complementary to its conceptual framework.
  5. Pragmatic: Managerial economics is pragmatic. It is concerned with those analytical tools, which are useful in improving decision-making. Economic theory appropriately ignores the variety of backgrounds and training found in individual firms but managerial economics considers the particular environment of decision making.
  6. Normative: Managerial economics belongs to normative economics rather than positive economics. In other words, it is prescriptive rather than descriptive. The main body of economic theory confines itself to descriptive hypothesis, attempting to generalize about the relations among different variables without judgment about what is desirable or undesirable. Managerial economics firstly tells what aims and objectives a firm should pursue and secondly, it tells how best to achieve these aims in particular situations.
  7. Multi-disciplinary: Managerial economics is related with different disciplines such as Statistics, Mathematics, Management, Operational Research, Psychology etc.
Similarly, managerial economics provides a link between traditional economics and the decision sciences for managerial decision-making.

Managerial economics is an application of economic theories and tools of decision science in solving business problems.


Forward planning and decision making are the two important functions of a business executive. It may be defined as a process of selecting a particular – course of action from among number of alternative courses of action. There would be no scarcity, no price of action and of course no economics whether there is any limitation of resources. But factors of production are limited and can be put in
alternative uses. Hence, questions of choice arise. Decision-making involves making choice or making decision for attaining desired goal. The rationale of good decision-making lies in its capacity to build high result from scare resources. Forward planning means established plans for the future plans for various things are made like production, pricing, capital, raw material, labor, wage etc.

Managerial decisions are made where the outcomes associated with each possible course of action are known with certainty. All major managerial decisions are made under conditions of uncertainty. The manager must select a course of action from the observed alternatives. Decision making of forward planning is difficult due to uncertainty. The manager may unknown of future sales, costs, profits, capital situations etc. So, that the decisions should be made on the basis of past data and current information as well as future is predicted as accurately as possible.

The managers should confront uncertainty and the main problem is arranging uncertainty, which drives to risk and is the chances, which expected result might not occur, or there is a chance of loss. The uncertainty area are numerous such as market demand, production cost, pricing, environmental factors, financing and profits which influence revenue, production, use of allocation of resources, spending outlays, profit and create problems in raising capital, pricing, etc.

Due to these, decisions will have to be made in conditions of uncertainty and must formulate plans for the future. In this condition, managerial economics is of considerable help. Economic theory deals with demand, pricing cost, production, composition, profit etc. these concept aided by accounting, statistics, and mathematics help to solve business problems. The economic analysis can be used towards solving business problems constitutes the subject matter of management economics.

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