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Objectives of Managerial Economics

•  After going through this unit , you will be able to

          -    explain Meaning and Definition of Managerial Economics 

          -    acquaint with the nature of Managerial Economics

          -    familiarize with the Scope of Managerial Economics

          -    throw light upon Managerial Economics and its relationship with other desciplines

• Introduction of Managerial Economics

In management studies, the terms 'Business Economics'  and 'Managerial Economics'  are often synonyms. Both the terms, however, involve 'economics' as a basic discipline useful for certain functional areas of business management. Economics is the study of men as they live, behave, move and think in the ordinary business of Life.

Economics, For most purposes, can be classified into two broad categories : 

1. Macro Economics 

2. Micro Economics

Macro Economics is the study of the economics system as a whole. It encompasses techniques for analyzing changes in total output, total employment, the consumer price index, the unemployment rate, and exports and import. 

Micro Economics focuses on the behavior of the individual actors on the economic  stage: firms and individuals and their iteration in markets. 

Managerial economics should be thought of as applied micro economics, So managerial economics is an application of that part of micro economics, focusing on those topics of the greatest interest and importance to managers. The topics include demand, production, cost, pricing, market structure and government regulation. A strong grasp of the principles that govern the economics behavior of firms and individuals is an important managerial talent.

In general, managerial economics can be used by the goal-oriented manager in two ways. First, given an exciting economic environment, the principles of managerial economics provide a frame work for evaluating whether resources are allocated being efficiently within a firm. For example, economics can help the manager determine if profit could be increased by reallocating labor from marketing activity to the production line. Second these principles help managers respond to various economic singles. For  example, given an increase in price of output or development of new lower cost production technology, the appropriate managerial response would be to increase output. 

Alternatively, an increase in the price of one input, say labor, may be a single to substitute other inputs, such as capital, for labour in production process...