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Managerial Economics

Managerial economics is a science that deals with the application of various economics theories, principles, concepts and techniques to business management in order to solve business and management problems It deals with the practical application of economic theory and methodology to decision-making problems faced by private, public and non profit making organizations.. In the words of Spencer and Salesman “Managerial Economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by the management. Scope of Managerial Economics The term “scope” indicates the area of study, boundaries, subject matter and width of a subject. Business economics is comparatively a new and upcoming subject. The following topics are covered in this subject :- 1) Objectives of a firm :- Profit minimization has been considered as the main objective of a business unit in olden days, but in the context of present day business environment ,many new objectives have come to the fore. Today, there are multiple objectives and they are multi dimensional in nature.

Some of them are competitive while others are supplementary in nature. There are economic, social, organizational, unman and national goals. There are managerial and behavioral theories. 2) Demand Analysis

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and Forecasting :-A firm is basically a producing unit. It produce different kinds of goods and services. It has to meet the requirement of consumers in the market. The basic problems of what to produce where to produce, for whom to produce, how to produce and how to distribute them in the market are to be answered by a firm. ) Production and Cost Analysis :-Production implies transformation of inputs into outputs. It may be either in physical or monetary terms. Minimization of outputs is one of the basic goals of a firm. Production analysis deals with production function, laws of return, returns to scale, economies of scale etc. Minimization of output with minimum cost is the basic slogan of any firm. 4) Pricing Decisions, Policies and Practices :- Pricing Decision is related to fixing the prices of goods and services.

This depends on the pricing policy and practices adopted by a firm. Price setting is one of the most important policies of a firm. The amount of revenue, the level of income and above all the volume of profit earned by a firm directly depend on its pricing decisions. 5) Profit Management :-A firm is basically a commercial or business unit. Consequently, the success or failure of it is measured in terms of the amount of profit it is able to earn in a competitive market.

Under profit management, one has to study various theories of profit, emergence of profit, functions of profit and its measurement, etc. 6) Capital Management :-let is another crucial area of business. Success of any business depends on adequate capital investment and its proper management. Under capital management, one has to study capital requirement, methods of capital inflammation, capital budgeting, optimal allocation of capital, selection of highly Managerial Economics

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