Relationship between managerial economic, economic, and other subjects

After studying this lesson you will be able to distinguish managerial economics with its related subjects. Managerial economic is not something which is related to economics only, but there are other areas also to which managerial economic is related. Other related subjects of managerial economics are:

• Economics

• Mathematics

• Statistics

• Accounting

• Operation Research

• Computers

• Management

Before knowing the relationship between managerial economics and other related fields it is customary to divide economics into “positive” and “normative” economics. Economists make a distinction between positive and normative that closely parallels popper’s line of demarcation.

Positive economics:

It deals with description and explanation of economic behavior, Economics and Managerial economics. Managerial economics draws on positive economics by utilizing the relevant theories as a basis for prescribing choices. A positive statement is a statement about what is and which contains no indication of

approval or disapproval. It’s not like that positive statement is always right, positive statement can be wrong. Positive statement is a statement about what exists.

Managerial Decisions - Decision analysis

Managerial economic is concerned with decision making at the firm level.
Decision making problems faced by business firms:
• To identify the alternative courses of action of achieving given objectives.
• To select the course of action that achieves the objectives in the economically most efficient way.
• To implement the selected course of action in a right way to achieve the business objectives.

The prime function of management is Decision making and forward planning. Forward planning goes hand in hand with decision making. Forward planning means establishing plans for the future

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.?