In management etc. are studied in it.


In managerial economics unit of study is firm or business organization and an individual industry. It is the problems of business firms such as problem of forecasting demand, cost of production, pricing, profit, planning, capital, management etc. are studied in it. 2.

Economics of firms:Managerial economics largely use that body of economic concepts and principles which is known as ‘Theory of the Firm’ or ‘Economics of the Firm’. ” In addition, it also seeks to apply the profit theory which forms part of theories of distribution. 3. Uses macro-economic analysis:Managerial economics also uses macro-economics to analysis and understand the general business environment in which the business firm must operate. Business management must have the adequate knowledge of external forces that affect the business of the firm. The important macro-factors that affect the firm are trends in national income and expenditure, business cycles, economic policies of the government, general price trends, trends in foreign trade and anti-monopoly measures. 4.

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Managerial economics is pragmatic:It is concerned with practical problems and results. It has nothing to do with abstract economic theory which has no practical application to solve the problems faced by business firms. It considers the particular environment of decision-making and not general one.

5. Managerial economic is normative:The nature of managerial economics is prospective and not descriptive. It deals with future planning, policy-making, decision-making and how to make full use of economic principles in all these. It involves value judgements.

This has two aspects (i) what aims objective a firm should pursue; and (ii’) how best to achieve these objectives in a given situation.

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