Meaning and Scope of Managerial Economics

2130 Words Nov 17th, 2008 9 Pages


Emergence of managerial economics as a separate course of management studies can be attributed to at least three factors.:

(a) growing complexity of business decision making process due to changing market conditions and business environment
(b) consequent upon, the increasing use of economic logic , concepts theories and tools o economic analysis in the process of business decision making
(c) Rapid increase in demand for professionally trained managerial manpower

The growing complexity of business decision- masking has inevitably increased the application of economic concepts, theories and tools of economic analysis in this area. The reason is that making an
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Footwear Industry: Shoes may became outdated because fashions change very rapidly
Dressmaking Industry : As fashion changes very often, the manager of a dress making industry will have to keep abreast of changing fashions.

The Problem of forward planning

When a manager has to plan for the future he has to make an accurate forecast of the position of raw materials, the prices of factors of production, the market prices of his products , the demand for then ,etc.


In general, the scope of managerial economics comprises all those economic concepts, theories and tools of analysis related to demand prospects, production and cost, market structure, level of competition and general business environment to find solutions to practical business problems. In other words, managerial economics is economics applied to analysis of business problems and decision making.

The areas of business issues to which economic theories can be directly applied can be broadly divided into two categories :

1. Microeconomics app

The scope of managerial economics emanates from the solutions it offers to the manager who is confronted with problems such as :

CHOICE OF COMMODITY what to produce

CHOICE OF SIZE OF THE FIRM how much to produce

CHOICE OF TECHNOLOGY choosing the factor combination


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