21-04-2014, 02:54 PM
ROLE OF MANAGERIAL ECONOMIST IN BUSINESS DECISION MAKING
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INTRODUCTION
Managerial economics or business economics is a division of micro economics that focuses on applying economic theories directly to business. the application of economic theory through statistical methods helps to make decisions and determine strategy on pricing,operations,risk,investments and production. the overall role of managerial economics is to increase the efficiency of decision making in business to increase profit.
Decision making
Decision making can be defined clearly as selecting one of the best alternatives available - that entails being two or more alternatives. According to George Terry, “Decision making is the selection of a particular course of action, based on some criteria, from two or more possible alternatives.” Decision making is thus choosing the best course of action out of the available options while aiming at the achievement of particular organizational objectives.
Managerial Economics
Managerial economics is related to the economic theory which is to be applied to the business with the objective of solving business problems and to analyze business situations and the factors constituting the environment in which a business is operated. Managerial economics has been defined by Spencer and Siegelman as," The integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.”
External factors
External factors are those factors that lie outside a business. these factors collectively can be called business environment. the management cannot control these factors. but they have to understand the effects and implications of these factors on the business and to take decisions accordingly. the external factors may refer to government policies, market trends, population –shifts, business cycle etc.
Role of managerial economist
To collect data-he collects data and presents it to the management in the formats helpful for decision making.
To analyse the economic trends-the managerial economist makes an analysis of the local, regional or world-wide economic trends.
To act as an advisor to the firm-he studies the various government policies and regulations and analyse the impact of these policies on the firm.
To forecast market trends-with sound knowledge of economic principles the managerial economist can make a forecast of the market trends.
Conclusion
Managerial economics plays a significant role in the business organizations. It is very much effective to the management in decision making and forward planning in relation to the internal operations of a business as it gives clear understanding of market conditions as well as analytical tools through which the competitions prevailing in the markets can be studied, at the same time the market behavior can be predicted. It enables to analyze the information about the business environment in which a business is managed. It is meant to undertake systematic course of business plans by making possible forecasts. Managerial economics contributes to the profitable growth of business and effective solutions of the business problems by changing the economic scenario in to the feasible business opportunities for business organizations while enabling managers to optimize business decisions as well as involving them in the activity of forward planning efficiently.