'Business Economics' is also called 'Managerial Economics'.
In simple words, when we are applying the study of whole economic theories in our business to take any sort of managerial decision, that means we are applying managerial economics.
The root of all the management knowledge is 'Economics'.
The Neo-classical economist Alfred Marshall in his book 'Principles of Economics' published in 1890 A.D, had mentioned that the root of economics was 'Political Science' This implies that the traditional economics was closely connected with political science. However, as per time and necessity- the nature, scope and subject matter of economics was extended. Therefore, traditional economics was considered as a separate branch of discipline.
The development and exploration of different management theory made the essence of a separate branch of discipline. The management philosophers felt that, if the theory of economics could be integrated with the management theory then, the managerial decision making could be more realistic.
Therefore, Managerial Economics ( Business Economics ) came into existence - as a separate branch of knowledge to help in achieving the organizational mission and vision through effective decision making.
Managerial Economics refers to the application of economic theory
(microeconomics and macroeconomics) and the tools of analysis of decision
science (mathematical economics and econometrics) to examine – how an
organization can achieve its aim or objectives most efficiently.
According to Joel Dean:
“The purpose of managerial or
business economics is to show how economic analysis can be used in formulating
managerial policies.”
According to Prof. Even Douglas :
“ Business economics is concerned
with the application of economic principles and methodologies to the
decision-making process within the firm or organization under the condition of
uncertainty.”
Due to the consensus-ad-idem
regarding the definition of managerial economics among different economist,
managerial economics or business economics is differently defined by Edwin
Mansfield, D.C.Hauge, Brigham and Pappas, Spencer and Siegelman and so on. However,
the underlying concept is same as explained by Prof. Dominick Salvatore in his
book “Managerial Economics” described in the Fig 1-1.
Therefore,
Managerial Economics is the
integration of economic theory and decision science tools in business processes
to find the optimal solution to managerial decision problems. It examines how economic theory, decision sciences and functional areas of business studies- interacts with each other to achieve the organizational goal.
Note :
Click on these links for :
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Note :
Click on these links for :
- Characteristics of Managerial economics and Role of Managerial Economics in Business Decision Making
- Difference between Managerial Economics and Traditional Economics
- Is Sales Revenue Maximization Model is better than Profit Maximization Model
- Practical approach towards Profit Maximization and Boumol's Sales Revenue maximization Model
Practical Approach to Accounting Cost and Economic Cost
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