Importance and significance of managerial economics
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Business and industrial enterprises aim at earning maximum proceeds. In order to achieve this objective, a managerial executive has to take recourse in decision making, which is the process of selecting a specified course of action from a number of alternatives. A sound decision requires fair knowledge of the aspects of economic theory and the tools of economic analysis, which are directly involved in the process of decision-making. Since managerial economics is concerned with such aspects and tools of analysis, it is pertinent to the decision making process.
Spencer and Siegelman have described the importance of managerial economics in a business and industrial enterprise as follows:
1- Accommodating traditional theoretical concepts to the actual business behavior and conditions: Managerial economics amalgamates tools, techniques, models and theories of traditional economics with actual business practices and with the environment in which a firm has to operate.
2- Estimating economic relationships: Managerial economics estimates economic relationships between different business factors such as income, elasticity of demand, cost volume, profit analysis etc.
3-Predicting relevant economic quantities: Managerial economics assists the management in predicting various economic quantities such as cost, profit, demand, capital, production, price etc.
4- Understanding significant external forces: The management has to identify all the important factors that influence a firm. These factors can broadly be divided into two categories.
(A)External factors: A firm cannot exercise any control over these factors. The plans, policies and programs of the firm should be formulated in the light of these factors.
(B) Internal factors: These factors fall under the control of a firm. These factors are associated with business operation. Knowledge of these factors aids the management in making sound business decisions.
5- Basis of business policies: Managerial economics is the founding principle of business policies. Business policies are prepared based on studies and findings of managerial economics, which cautions the management against potential upheavals in national as well as international economy. Thus, managerial economics is helpful to the management in its decision-making process
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Spencer and Siegelman have described the importance of managerial economics in a business and industrial enterprise as follows:
1- Accommodating traditional theoretical concepts to the actual business behavior and conditions: Managerial economics amalgamates tools, techniques, models and theories of traditional economics with actual business practices and with the environment in which a firm has to operate.
2- Estimating economic relationships: Managerial economics estimates economic relationships between different business factors such as income, elasticity of demand, cost volume, profit analysis etc.
3-Predicting relevant economic quantities: Managerial economics assists the management in predicting various economic quantities such as cost, profit, demand, capital, production, price etc.
4- Understanding significant external forces: The management has to identify all the important factors that influence a firm. These factors can broadly be divided into two categories.
(A)External factors: A firm cannot exercise any control over these factors. The plans, policies and programs of the firm should be formulated in the light of these factors.
(B) Internal factors: These factors fall under the control of a firm. These factors are associated with business operation. Knowledge of these factors aids the management in making sound business decisions.
5- Basis of business policies: Managerial economics is the founding principle of business policies. Business policies are prepared based on studies and findings of managerial economics, which cautions the management against potential upheavals in national as well as international economy. Thus, managerial economics is helpful to the management in its decision-making process
hope this answer helps you
please mark it as brainliest
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it is helpful in profit planning and control , it helps in managers to decide on the planning and control of the benefits . it is synchronized between the planning and control of any institution or firm and hence it's play huge role in business decisions ..
I hope it's helpful to you .....
I hope it's helpful to you .....
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