|Managerial economics is an application of economic theory and method to practice the managerial decision-making or solving business problems. It uses the tools and techniques of economic analysis to solve managerial problems or to achieve the firm’s desired objectives. So that managerial economics is very important to entrepreneurs in decision making and forward planning of a business.|
Managerial economics is by nature goal oriented and prescriptive and aims at maximum achievement of objectives. Many economists and thinkers have given various definitions of managerial economics in their words. According to Prof. Pappas and Brigham, “Managerial economics is designed to provide a rigorous treatment of those aspects of economic theory and analysis that are most useful for managerial decision analysis.” They more added that, “Managerial economics is the application of economic theory and methodology to business administration practice. More specifically, managerial economic analysis and solve the managerial problems.”
In the words of Prof. D.C. Hague, “Managerial economics is a fundamental academic subject which seeks to understand and to analyze the problems of business decision making.” This definition states that it should be finalized the business problem for decision-making. Prof. Savage and Small defined as, “Managerial economics is concerned with business efficiency, the function of managerial economists being the efficient direction of business organization to make a productive enterprises out of material and human resources.” In the words of Hynes, “Managerial economics is the study of allocation of resources available to a firm among the activities of that unit.” Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management.
Most of the definitions of managerial economics is related to decision making are more acceptable. Managerial economics is the science of decision making which provides a link between two disciplines that are economics and business management.
In short, the use of economic theory and methods to analyze and improve the managerial decision-making process combines the study of theory and practice to gain a useful and practical perspective. From both economics and decision sciences, managerial economics provides an integrative and comprehensive framework for solving managerial decision.
Managerial economics links traditional economics with the decision sciences to develop important tools for managerial decision-making. Although managerial economics is comparatively a new subject in the early part of 1950s, it was known as business economics in the beginning. The term of managerial economics gradually has become popular and displaced the business economics.
It is closely related to traditional economics that is based on the theories and principles such as demand analysis, production analysis, price theories and practice, theory of profit and market structure which are the subject matter of micro economic theory. But there is little bit differences between managerial economics and traditional economics theory because managerial economics seeks the help of other disciplines such as accounting, management, statistics, mathematics to get optimal solutions to the decision problems.
The difference between managerial economics and traditional economics can be summarized as follows:
|Managerial Economics||Traditional Economics|