Scope of Managerial Economics Essay

stinting science has two major(ip) branches namely Micro scotchals and Macro policy-making economy and both are use to telephone circuit analytic thinking and decision-making directly or indirectly. Managerial economics comprises all those economic concepts, theories, and tools of analysis which can be use to analyze the commerce surround and to drive solutions to practical business problems. In different words, managerial economics is applied economics The areas of business issues to which economic theories can be applied may be slackly divided into the chase two categories usable or Internal issues and environmental or External issues Micro Economics use to Operational IssuesOperational problems are of subjective nature. They arise within the business transcription and fall within the perview and control of the management. or so of the important ones are Choice of business and nature of product, i.e., what to produce Choice of the sizing of the firm, i.e., how much to produce Choice of technology, i.e., choosing the performer combination Choice of cost, i.e. ,how to price the trade good How to promote sales, i.e., sales promotion measures How to example price competition How to decide on new investment How to manage proceeds and metropolis How to manage inventory, i.e., stock of both finished goods and raw material The to a higher place mentioned issues fall within the ambit of micro economics because, the following constitute the celestial orbit of managerial economics surmisal of direct Consumer behaviour- maximization of satisfaction Utility analysis Indifference curve analysis shoot analysis and elasticity of demand essential forecasting and its techniques/methods Theory of mathematical product and production decisions Production function Inputs and takings relationship in short-run and long run Cost and output relationship in short-run and long-run Economies and diseconomies of scale 7 Optimum sizing of firm a nd determining the size of firm. Deployment of resources labour and cap for having optimal combination of factors of production. Analysis of market mixer system and pricing theory Determination of price under different market conditions set discrimination Multiple pricing constitution Advertising in competitive markets opposite pricing policies and practices arrive ats analysis and earnings management Nature and types of profit Profit planning and policies Different theories of profit Theory of capital and investment decisions Cost of capital and return on capital-choice of investment projects Assessing the faculty of capital Most efficient allocation of capital Capital budgeting Macro Economics Applied to Business EnvironmentEnvironmental issues relate to general environment in which business ope tramps. They are related to general economic, fond and political environment of the country. The following are the main ingredients of economic environment of a coun try The type of economic system- capitalist, tenderist or mixed economic system. public trends in production, employment, income, prices, saving and investment. Volume, spell and direction of foreign trade. Structure of and trends in the working of financial institutions- Banks, NBFCs, insurance companies an early(a) financial institutions. Trends in labour and capital market. Economic policies of the government- Fiscal policy, Monetary policy, EXIM- policy, industrial policy, Price policy etc. fond factors- value system, property rights, customs and habits. tender organizations- job unions, consumer unions and consumer co-operatives and producers unions. governmental environment is comprise of the following factors Political system-democratic, socialist, communist, authoritarian or whatsoever other type. States attitude towards private sphere Policy, manipulation and working of public sector Political stability. The degree of openness of the economy and the mould of MNCs on domestic markets- Integrations of nations economy with rest of the world (Policy of globalization) 8The environmental factors confine a distant reaching influence on the carrying into action and performance of firm/s. Therefore, business managers have to consider thechanging economic, social and political environment before taking any decision. Managerial economics is however, concerned with barely the economic environment and in item with those which form the business climate. The study of social and political factors falls out of the perview of managerial economics. It should, however, be borne in mind that economic, social and political factors are inter-dependent and interactive. The environmental issues mentioned preceding(prenominal) fall within fourwalls of macro economics, therefore the following constitute the scope of managerial economics Issues related to Macro Variables General trends in economic activities of the country coronation climate Tre nds in output Trends in price direct (state of inflation) Consumption level and its pattern Profitability in business expansion Issues related to Foreign Trade Trade relation with other countries welkin and firms dealing in exports and imports Exchange rate fluctuations Inflow and outflow of capital Trends in multinational trade- volume, composition, and direction Trends in international prices of various goods and services International monetary mechanism Rules, regulations and policies of WTO Issues related to Government Policies formula and control of economic activities of private sector business enterprises Enforcing the government rules and regulations for imposing of social responsibility Striking balance amid firms objective of profit maximization and societys stakes Policy and regulatory measure for minify social costs in damage of environmental pollution, congestion and slums in cities, rudimentary amenities of life such as means of transportation an d communication, water, electricity render etc.