BASICS OF MANAGERIAL ECONOMICS

What do you mean by decision making?

Well decision making is not something which is related to managers only or which is related to corporate world, but it is something which is related to everybody’s life. Whether a person is working or non working, irrespective of his/her field decision making is important to everyone.

You need to make decision irrespective of the work you are doing. As a student also you have to take so many decisions.

Suppose at a particular point of time you want to go for a movie, and at the same point of you want to go for shopping then what you will do.

You can’t do two things at the same point of time. You have to decide what to first and what to do next.

Therefore decision making can be called as choosing the right option from the given one.

To decide is to choose. Whether to do this or to do that is what decision making.

Meaning of decision making

Decision making is the most important function of business managers. Decision making is the central objective of Managerial Economics.

Decision making may be defined as the process of selecting the suitable action from among several alternative courses of action.

The problem of decision making arises whenever a number of alternatives are available.

Such as :

What should be the price of the product?

What should be the size of the plant to be installed?

How many workers should be employed?

What kind of training should be imparted to them?

What is the optimal level of inventories of finished products, raw material, spare parts, etc.?

Therefore we can say that the problem of decision making arises due to the scarcity of resources. We have unlimited wants and the means to satisfy those wants are limited, with the satisfaction of one want, another arises, and here arises the problem of decision making.

While performing his function manager has to take a lot of decisions in conformity with the goal of the firm. Most of the decisions are taken under the condition of uncertainty, and involves risks.