Managerial Economics and Other Disciplines

-

 

 

Managerial Economics and Other Disciplines

Managerial Economics is closely related to other disciplines and frequently impinges upon their fields.

  1. Managerial Economics and Economics

Micro economics is also known as ‘partial equilibrium analysis deals with the problems of individuals, firms and industries and is the main source of inspiration to Managerial Economics. Concepts like elasticity, marginal revenue, Marginal cost and models like Price leadership, kinked demand curve, and Price discrimination are made use of in Managerial Economics.

            Macro economics aids Managerial Economics in the area of forecasting. The aggregates of the economic system such as Gross National Product, General Price Index and Level of Employment serve as a useful guide for devising relevant business policies.

  1. Managerial Economics and Statistics

Statistics provides many tools Managerial Economics. It is highly useful in demand forecasting. A correct estimate of demand is vital for the management in framing a suitable inventory policy, statistical tools like averages. Dispersion, correlation, regression, time seri3es etc are extensively applied in various managerial aspects.

  1. Managerial Economics and Mathematics

Operations research is the “application of mathematical techniques in solving business problems”. Linear programming, inventory models, game theory, input-output analysis, queuing and simulation are some of the techniques developed by operational researchers. These techniques are applied in Managerial Economics.

  1. Managerial Economics and Accounting

Managerial Economics is also related to accounting. For example the profit and loss statement of affirm will furnish necessary information to the manager to identify the specific areas of loss and arrive at suitable decisions. It is very much useful ion cost control.

 

 

 

  1. Managerial Economics and Decision-Making

The theory of decision making too, has a significant place in Managerial Economics. It deals with the selection of a particular course of action among the various alternatives. In order to choose a particular course of action, many factors are taken into account. Sociological and Psychological factors are considered and weighted against economic factors in arriving at a correct decision.

 

Role and Responsibilities of a Managerial Economist in Business

A Managerial Economist has a significant role to play in business by assisting the managements in their successful decision making and forward planning goals. The factors which influence the business over a period may lie within the form or outside the firm. In general, these factors can be divided in to two categories

(A) External and

(B) Internal factors.

The external factors lie outside the control of management, because they are external to the firm and are side to constitute the business environment. The internal factors lie within the scope and operations of a firm and hence within the control of the management and they are known as business operations.

A. External Factors

The function of a Managerial Economist is to analyze the external factors and recommend suitable policies. The following are the important external factors affecting the firm.

 

    1. General Economic Conditions

The most important external factors is the general economic conditions of the economy such as business cycles, competitive conditions of the market, size and the rate of growth of national income, the regional pattern of income distribution, influence of globalization on the domestic economy etc.

It is the duty of the Managerial Economist to gather and analyze information with regard to these changes, and advise the management regarding their likely effects on the operations of the firm and recommend suitable ways to pursue the organizational goals.

 

2. Nature of Demand

The second important external factors relates to the nature of demand for the product. Since purchasing power is an important variable influencing demand, Managerial Economist has to study the purchasing power trend in general and in the region concerned in particular. More over, it is his function to observe whether fashions, tastes and preferences undergo any change and whether it is likely to have an impact on the demand for the product.

 

1.     Input Cost

The third external factor influencing the firm is the input cost of the firm. The Managerial Economist has to advise the management on labour market conditions ie, the cost of labour in different regions and for different occupations. He also studies the money market conditions, the changing scenario in government’s credit policy and the possible ways of achieving the least-cost combination of factors and so on.

 

2.     Marketing

Buying of raw materials and selling of finished goods are two important aspects of marketing. The Managerial Economist has to study the markets form where the firm is buying its raw materials and selling its finished goods. The understanding helps him to evolve and frame a suitable price policy for the firm.

 

3.     Market Share

Market share refers to the share of a firm in the industry for a particular product. Expansion of market share is a good symptom of growth. Therefore, Managerial Economist has to examine the opportunities and strategies which help in the expansion of the firm’s share in the regional and international markets.

4.     Economic Policies

A Managerial Economist can also be helpful to management in making decisions relating to the internal operations of a firm. The analysis of cost structure and forecasting of demand are very essential. More over, it is his responsibility to bring about a synthesis of policies relating to production, investment, inventories and price. 

 

B. Internal Factors

A Managerial Economist can also be helpful to the management in making decisions relating to the internal operations of a firm. The analysis of cost structure and forecasting of demand are very essential. More over, it is his responsibility to bring about a synthesis of policies relating to production, investment, inventories and price. 

 

C. Specific functions or Responsibilities of Managerial Economist

After conducting a survey of the British economy, K. J. W. Alexander and Alexander G. Kemp, conclude that the Managerial Economist can perform specific function in the following areas:

            Sales fore casting, Industrial market research, Economic analysis of competing companies, Pricing problems of the industry, Capital projects, Production programmes, Security management analysis, Advice on trade and public relations, Advice on primary commodities, Advice on foreign exchange management, Economic analysis of agriculture, Analysis of underdeveloped countries and Environmental forecasting etc.

 

 

 

 

 

Comments

Post a Comment

Popular posts from this blog

What Is International Trade?

-
   What Is International Trade? International trade theories are simply different theories to explain international trade. Trade is the concept of exchanging goods and services between two people or entities. International trade is then the concept of this exchange between people or entities in two different countries. People or entities trade because they believe that they benefit from the exchange. They may need or want the goods or services. While at the surface, this many sound very simple, there is a great deal of theory, policy, and business strategy that constitutes international trade. In this section, you’ll learn about the different trade theories that have evolved over the past century and which are most relevant today. Additionally, you’ll explore the factors that impact international trade and how businesses and governments use these factors to their respective benefits to promote their interests. What Are the Different International Trade Theories? “Around 5,200 ...
Read more

Types of Foreign Exchange Transactions

-
    Types of Foreign Exchange Transactions Definition: The Foreign Exchange Transactions refers to the sale and purchase of foreign currencies. Simply, the foreign exchange transaction is an agreement of exchange of currencies of one country for another at an agreed exchange rate on a definite date. 1. Spot Transaction: The spot transaction is when the buyer and seller of different currencies settle their payments within the two days of the deal. It is the fastest way to exchange the currencies. Here, the currencies are exchanged over a two-day period, which means no contract is signed between the countries. The exchange rate at which the currencies are exchanged is called the Spot Exchange Rate. This rate is often the prevailing exchange rate. The market in which the spot sale and purchase of currencies is facilitated is called as a Spot Market. 2. Forward Transaction: A forward transaction is a future transaction where the buyer and seller enter into an agreement of sale and...
Read more

Approach to managerial Decision making

-
    Approach to managerial Decision making OR Application of the Theories of Economics in Business Decisions The following are the main theories in economics that help the firm in the decision-making process. Theory of Demand Demand theory explains the consumer’s behavior. The theory helps to understand the behavior of consumers when the determinants of demand such as income, taste and fashion, prices of substitutes etc change. Knowledge of demand theory is vital in the choice of commodities for production. Theory of Production The basic function of a firm is to produce goods and services and sell them in the market. Production requires employment of various factors of production. The factors are substitutes among themselves to a certain extent. To maximize production and profit, it is necessary to achieve the least-cost combination of factors. Production theory is of immense use in determining the size of the firm, the size of the total output, and t...
Read more