The Case Of Freddie Mac, Fannie Mae and Ginnie Mae
The role that the government played in causing the subprime mortgage crisis is highly debatable. However, the same cannot be said regarding the role performed by the so called government sponsored entities. The Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and Government National Mortgage Association (Ginnie Mae) are three […]
7 Reasons Why Real Estate Is the Worst Investment
Owning a house is a dream for most people around the world. This is the reason why investment in housing is disproportionately higher amongst the middle class. The middle class seldom invests in stock markets. On the other hand, almost every middle-class salaried person in America and even across the globe owns real estate. Also, […]
Currency Wars and the Making of the Next Financial Crisis in the Global Economy
The Recent Currency Wars The recent drop in the value of several emerging market currencies coupled with the fact that the BOJ (Bank of Japan) has embarked on extreme monetary stimulus and the US Federal Reserve’s unlimited bond buying spree have rekindled fears of a currency war among the currencies of the world. Added to […]
What Happens When Countries Do Not Pay Back Their Debt?
Sovereign debt is regularly in the news even though we may not realize it. Several poor countries keep defaulting on their debt. This occurs more frequently with countries in Latin America and Africa. People have a limited understanding of how sovereign debt works. This is because sovereign debt is a bit counter-intuitive. It is true […]
What is Unemployment ? – Definition of Unemployment
The detailed study of any subject must always start by understanding the definition of the subject at hand. This is because the definition has profound implications on the way the study of the subject is conducted. The study of unemployment is a classic example of this case. We often come across unemployment statistics which are […]
Managerial Economics can be defined as amalgamation of economic theory with business practices so as to ease decision-making and future planning by management.
Managerial Economics assists the managers of a firm in a rational solution of obstacles faced in the firm’s activities. It makes use of economic theory and concepts. It helps in formulating logical managerial decisions.
The key of Managerial Economics is the micro-economic theory of the firm. It lessens the gap between economics in theory and economics in practice.
Managerial Economics is a science dealing with effective use of scarce resources. It guides the managers in taking decisions relating to the firm’s customers, competitors, suppliers as well as relating to the internal functioning of a firm.
It makes use of statistical and analytical tools to assess economic theories in solving practical business problems.
Study of Managerial Economics helps in enhancement of analytical skills, assists in rational configuration as well as solution of problems.
While microeconomics is the study of decisions made regarding the allocation of resources and prices of goods and services, macroeconomics is the field of economics that studies the behavior of the economy as a whole (i.e. entire industries and economies).
Managerial Economics applies micro-economic tools to make business decisions. It deals with a firm.
The use of Managerial Economics is not limited to profit-making firms and organizations. But it can also be used to help in decision-making process of non-profit organizations (hospitals, educational institutions, etc). It enables optimum utilization of scarce resources in such organizations as well as helps in achieving the goals in most efficient manner.
Managerial Economics is of great help in price analysis, production analysis, capital budgeting, risk analysis and determination of demand.
Managerial economics uses both Economic theory as well as Econometrics for rational managerial decision making. Econometrics is defined as use of statistical tools for assessing economic theories by empirically measuring relationship between economic variables. It uses factual data for solution of economic problems.
Managerial Economics is associated with the economic theory which constitutes “Theory of Firm”. Theory of firm states that the primary aim of the firm is to maximize wealth.
Decision making in managerial economics generally involves establishment of firm’s objectives, identification of problems involved in achievement of those objectives, development of various alternative solutions, selection of best alternative and finally implementation of the decision.
The following figure tells the primary ways in which Managerial Economics correlates to managerial decision-making.
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Currency Wars and the Making of the Next Financial Crisis in the Global Economy
February 12, 2025
Consumer Demand – Demand Curve, Demand Function & Law of Demand
February 12, 2025
Companies Need to Create Long Term Value to Survive the Uber Competitive Market
February 12, 2025
