Importance And Importance Of Economics In Business

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Economics: The Economic way of thinking for a Manager & using firm value in Managerial Decision-making. The study of Economics is important for various reasons and from I understand the fundamental meaning of economics is how individuals, government, firms and nation as a whole make a choice on allocating scarce resources to satisfy the unlimited wants and desires. From management perspective the study of economics becomes important in formulation of rational decisions. The study of economics helps a manager to arrive at various important conclusions on: What venture should a company opt for? Regarding diversifications, continuation in times of crisis, etc. Example: How the American airline industry, especially Pan Am and the TWA (Trans world airlines) are no longer in operation or are on the verge of exiting the airline industries as against the other small regional airlines who…show more content…
It helps a manager build a strong foundation for a company that foresees and plans the best alternatives, making rational choices to achieve profit maximization and optimum utilization of resources. The study of managerial economics helps the manager to choose the best of the alternatives available, which would fetch him the maximum benefit with optimum usage of the raw material. For example: A manager of fortune 500 company who are leading computer hardware manufacturer, if decides to add onto a new venture on chip production must decide if the company should really produce them or continue getting it from a dealer? What would be the best alternate? The Manager is the person who receives information from each of the formed departments, on compiling this information he has to integrate it and henceforth direct it to achieve the stated goals of Profit maximization and optimal resource allocation. The value lesson for a
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