Countless firms have used the well-established principles of managerial economics to improve their profitability. Managerial economics draws on economic analysis for such concepts as cost, demand, profit and competition. It attempts to bridge the gap between the purely analytical problems that intrigue many economic theorists and the day-to-day decisions that managers must face. It now offers powerful tools and approaches for managerial policy-making. It will be relevant to present here several examples illustrating the problems that managerial economics can help to solve. These also explain how managerial economics is an integral part of business. Demand, supply, cost, production, market, competition, price, etc. are important concepts in real business decisions.
Managerial Economics is a discipline that combines economic theory with managerial practice. It tries to bridge the gap between the problems of logic that intrigue economic theorists and the problems of policy that plague practical managers. The subject offers powerful tools and techniques for managerial policy-making. An integration of economic theory and tools of decision sciences works successfully in optimal decision-making in face of constraints. A study of managerial economics enriches the analytical skills, helps in the logical structuring of problems, and provides adequate solution to the economic problems.
To quote Mansfield, “Managerial Economics is concerned with the application of economic concepts and economic analysis to the problems of formulating rational managerial decisions.”
According to McNair and Meriam, “Managerial economics is the use of economic modes of thought to analyse business situations.”
Managerial Economics is concerned with the application of economic principles and methodologies to the decision making process within the firm or organisation under the conditions of uncertainty,” says Prof. Evan J Douglas.
Spencer and Siegelman define it as “The integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.”
According to Hailstones and Rothwel, “Managerial economics is the application of economic theory and analysis to practice of business firms and other institutions.”