How Would A Manager Use Economic Theory To Maximize Profit Price For A Service Or Product?

Managerial Economics

Managerial Economics tin exist defined as amalgamation of economical theory with business organization practices so as to ease controlling and futurity planning past management. Managerial Economics assists the managers of a business firm in a rational solution of obstacles faced in the firm'due south activities. It makes use of economic theory and concepts. It helps in formulating logical managerial decisions.

The fundamental of Managerial Economics is the micro-economic theory of the firm. It lessens the gap betwixt economics in theory and economics in practice. Managerial Economic science is a scientific discipline dealing with effective use of scarce resources. Information technology guides the managers in taking decisions relating to the firm'due south customers, competitors, suppliers as well as relating to the internal operation of a business firm. Information technology makes use of statistical and belittling tools to assess economical theories in solving applied business bug.

Study of Managerial Economics helps in enhancement of analytical skills, assists in rational configuration besides equally solution of bug. While microeconomics is the study of decisions made regarding the allocation of resources and prices of goods and services, macroeconomics is the field of economics that studies the beliefs of the economy as a whole (i.e. entire industries and economies). Managerial Economics applies micro-economic tools to make business decisions. It deals with a firm.

The employ of Managerial Economics is not limited to profit-making firms and organizations. Only it can besides be used to aid in conclusion-making process of not-profit organizations (hospitals, educational institutions, etc). Information technology enables optimum utilization of scarce resources in such organizations too as helps in achieving the goals in most efficient manner. Managerial Economic science is of great help in price analysis, product analysis, capital budgeting, take a chance analysis and determination of demand.

Managerial economics uses both Economic theory as well every bit Econometrics for rational managerial decision making. Econometrics is defined as apply of statistical tools for assessing economical theories by empirically measuring relationship between economic variables. It uses factual information for solution of economical problems. Managerial Economics is associated with the economical theory which constitutes "Theory of Firm". Theory of firm states that the chief aim of the firm is to maximize wealth. Determination making in managerial economic science generally involves institution of firm'south objectives, identification of problems involved in achievement of those objectives, development of diverse alternative solutions, pick of best alternative and finally implementation of the conclusion.

The post-obit figure tells the primary ways in which Managerial Economics correlates to managerial decision-making.

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