Let us examine in specific terms how a managerial economist can contribute to decision making in business. 11. Decision models are created to format solutions for problem situations and the process uses techniques such as, optimization, differential calculus and mathematical programming. In fulfilling the function of decision making in an uncertainty framework, economic theory can be pressed into service with considerable advantage. 7. In fact, a good deal of published material is already available and it would be useful for a firm to have someone who understands it. How does Managerial Economics differ from Economics? Of late, however, the term Managerial Economics has become more popular and seems to displace progressively the term Business Economics. , if they are found relevant for decision making. (2016, Sep 26). What are the segments, which have suffered a cut in their outlay? He may have to evaluate the capital budget in the light of short and long-range financial, profit and market potentialities. Is competition likely to increase or decrease? To illustrate, a business firm is free to take decisions about what to invest, where to invest, how much labour to employ and what to pay for it, how to price its products and so on but all these decisions are taken within the framework of a particular business environment and the firm’s degree of freedom depends on such factors as the government’s economic policy, the actions of its competitors and the like. Economic analysis of agriculture. Their advice and views are being sought by the government and society alike. 6. What products and services should be produced? Macroeconomics The subject matter of business economics, as such should utilize economic analysis that can be helpful in solving business problems, policy and planning. Nature of Managerial Economics Managerial Economics and Business economics are the two terms, which, at times have been used interchangeably. Their practical experience in business and industry adds stature to their views. A significant characteristic of the conditions, in which business organizations work and take decisions, is uncertainty. Formerly it was known as “Business Economics” but the term has now been discarded in favor of Managerial Economics. How should the available capital be allocated? Managerial economics is a branch of economics that applies micro economics in managerial decision making. Decision Making means the process of selecting one action from two or more alternative courses of action whereas forward planning means establishing plans for the future. Managerial economics borrows concepts from economics to idealize the strategic actions needed for decision making in a problem situation. 5. First, he has a major responsibility to “alert management at the earliest possible moment” in case he discovers an error in his forecast. p. cm. The managerial economist can do the job with competence. Advice on trade and public relations. theory with business practice for the purpose of facilitating decision making and forward planning by management.” Micro, Macro, and Managerial Economics Relationship Microeconomics studies the actions of individual consumers and firms; managerial economics is an applied specialty of this branch. On the other hand, decision sciences provide tools and techniques for constructing decision models and for evaluating the effect and results of alternative courses of action (i.e., alternative business strategies). Most of the people are not aware of the existence of some businesses with fantastic economic characteristics like high rate of return on invested capital, substantial profit margins and consistent growth. The scope of management science is broad and is closely linked with economic theory, decision sciences and accounting. That is why, in business concerns, his importance is being growingly recognized. How will these decisions affect the company’s cost, credit, sales and profits? By promptly drawing attention to changes in forecasting conditions, he will not only assist management in making appropriate adjustment in policies and programs but will also be able to strengthen his own position as a member of the management team by keeping his fingers on the economic pulse of the business. Certain important relevant questions in this connection are as follows :- 1. 2. , managerial economics serves as an integrating agent by coordinating the different areas and bringing to bear on the decisions of each department or specialist the implications pertaining to other functional areas. Economic theory deals with a number of concepts and principles relating, for example, to profit, demand, cost, pricing production, competition, business cycles, national income, etc. 8. 4. For this purpose, he should join professional associations and take active part in them. With regard to Business Operations: A managerial economist can also be helpful to the management in making decisions relating to the internal operations of a firm in respect of such problems as price, rate of operations, investment, expansion or contraction. A managerial economist can play a very important role by assisting the Management in using the increasingly specialized skills and sophisticated techniques which are required to solve the difficult problems of successful decision making and forward planning. He should be ready and even offer himself to take up special assignments, be that in study teams, committees or special projects. In so doing, it serves as an instrument in rehiring the economic welfare of the society through socially oriented business decisions. Decision making is an integral part of management. A few corollaries to the above proposition need also be emphasized here. Managerial Economics thus lies on the borderline between economics and business management and serves as a bridge between economics and business management. Thus while carrying out their functions; they may have to undertake detailed statistical analysis. Role and Responsibilities of a Managerial Economist. © Copyright 2014, Managementguru.net. How much output should be produced and at what prices it should be sold? 8. But there is no doubt that the job of a managerial economist requires alertness and the ability to work under pressure. What are the best sizes and locations of new plants? Title. Indian Petrochemicals Corporation Ltd. , a Government of India undertaking, also keeps an economist. Define – Managerial Economics . Fifthly, at the level of the firm, where for various functional areas functional specialists or functional departments exist, e. . Managerial Economics belongs to normative economics rather than positive economics (also sometimes known as Descriptive Economics). How about receiving a customized one? ISBN 0-471-48674-4 (pbk. Indian Context In the Indian context, a managerial economist is expected to perform the following functions :- 1. Societies can be classified into two main categories − production and consumption. Business economics, in the true sense is the integration economic principles with business practise. Why knowing about national accounting concepts is important? Let a Professional Writer Help You, © New York Essays 2020. . 5. A manager has to take several decisions in the management of business. 9. What changes in wage and price policies should be made now? Our objective is to give you a working knowledge of the analytical tools that bear most directly on the economic decisions firms must regularly make. Will Reserve Bank’s decisions stimulate or depress industrial production and consumer spending? The total influx of technology in underdeveloped countries is from the advanced capitalist c... International Trade and Finance * Adequate knowledge about the world economy literature: An analysis and forecast of external factors constituting general business conditions, e. . At times, he will have to reassure the management that an important trend will continue; in other cases, he may have to point out the probabilities of a turning point in some activity of importance to management. 10. Managerial economics is a discipline which deals with the application of economic theory to business management. What is the outlook regarding government’s economic policies and regulations? Will overseas markets expand or contract, and how will new foreign government legislation’s affect operation of the overseas plants? Specific Functions: A further idea of the role of managerial economists can be seen from the following specific functions performed by them as revealed by a survey pertaining to Britain conducted by K. J. W. Alexander and Alexander G. Kemp :- 1. Keeping management informed o various national and international developments on economic/industrial matters. Managerial EconomicsManagerial economics can be broadly defined as the study ofeconomic theories, logic and tools of economic analysisthat are used in the process of decision making. Thirdly, managerial economics helps in reaching a variety of business decisions. Are You on a Short Deadline? Write a short note on the specific functions of a Managerial economist with regard to Indian context.

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