Role of managerial economics in decision making process. ME/U1 Topic 3 Role of Managerial Economics in Decision Making 2018-12-22

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Role of Managerial Economics

role of managerial economics in decision making process

Though statistical methods are the handmaid of managerial economics, they should be used with care. Find out the pros and cons of every alternate and eventually evaluate them on such basis to find out the one which seem to be more effective than the rest. These factors have to be thoroughly analysed by the managerial economist and answers to the following questions have also to be found out: i What are the current trends in the local, regional, national and international economies? Some of the important types of business decisions are given below: i Production Decisions : Production is an economic activity which supplies goods and services for sale in a market to satisfy consumer wants thereby profit maximisation is made possible. The scope of management science is broad and is closely linked with economic theory, decision sciences and accounting. Thus, economic theories are given consideration at the level when the Government as a whole makes a decision of allocating its resources in accordance to preference of the services to offer to the citizens. The main topics covered are: Demand Determinants, Demand Distinctions and Demand Forecasting. Forecasts of future demand, investment decisions by business firms are especially based on the overall situation of the economy and its growth prospects.

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How does marginal analysis help in managerial decisions?

role of managerial economics in decision making process

Business economics however is the economics involved in business decision making. Business executives should take personnel decisions as an essential element. Through these benefits we can easily apprehend the importance of managerial economics. In these programmes the decisions of what activities to be undertaken in each is a prior bargaining between the Government of the United Republic and the development partners. Business economics is however not a branch of economic theory but separate discipline by itself having its own principles and methods.

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Role of a managerial economist in business

role of managerial economics in decision making process

The total cost of production subtracted from total sales revenue leaves total profit. The entrepreneur is the one who takes risk by introducing both new products and new ways of making products. . However, the decision made must confine to other liming factors. Paragraph 4 1 of Government Notice No. Economic theory has been broadly divided into microeconomics and macroeconomics. The reliability and currency of the information a business uses, therefore, is of the utmost importance.


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Applications of economics in business decision making

role of managerial economics in decision making process

However, if candor is not part of the culture, it is less likely that there will be diversity of ides, and as a consequence of this, the quality of the strategic decision is likely to be poorer. This is its prescriptive role. The mathemati­cal concepts used by the managerial economists are the logarithms and exponential, vectors and deter­minants, input-out tables. Like any other institution, the government is faced with the problem of limited resources against unlimited wants. It enables the business executive to assume and analyse things. If you would like your organization to learn about this through my speaking or consulting services, please click on this link.

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Managerial Decision Making Process (5 Steps)

role of managerial economics in decision making process

If the price of gasoline falls and, as a result you drive your car more often, the extra driving increases your demand for motor oil. The type of decision-making by managers of business firms also usually involves question of resource allocation within a firm or organisation. The foresaid expenditures are those financed solely by the government. We all must agree to the fact that decision making is a crucial aspect of management. It is employed when the objective func­tion is to maximise profit, output or efficiency.

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What Are the Steps in the Decision

role of managerial economics in decision making process

It involves the equi-marginal principle. The resources in the orm of capital, Land, Labour, and Management are not enough to satisfy an endless list of their uses. Is there any special emphasis for industrial promotion? Since no information or the knowledge about the future sales, profits or the costs is available for a business executive, the decisions are to be made on the basis of past data as well as the approximations being forecasted. The choice between these alternative courses of action depends on which will bring about larger increase in profits. There is very little influence of the management of departments in this type of expenditure. When pricing a commodity, the cost of production has to be taken into account. Macro-theories of consumption, investment demand, the general price level and business cycles are particularly relevant for making capital investment expenditure which yields returns in future years.


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The Importance of Managerial Economics in Decision Making

role of managerial economics in decision making process

The human brain simply cannot handle so much data. The determinants of estimating costs, the relationship between cost and output, the forecast of cost and profit are very vital to a firm. If you choose to have more of one thing, then , where there is an effective choice, you must have less something else. Explosion of bombs at Mbagala military camp caused loss of lives and properties of citizens and caused injuries and mental shock of thousands of Dar-es-salaam residents. The electronic gadgets will enable the manager to understand busi­ness problems in a better perspective and increase his ability to solve the business problems facing him in the management of business.


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What Are the Steps in the Decision

role of managerial economics in decision making process

Economic theory is based on certain assumptions. A model is an abstraction from reality. Consumers typically buy more steaks, steaks, furniture, and electronic equipment as their incomes increase. Whether it is the wrong pricing policy, bad labour-management relations or the use of outdated technology which is causing the problem of declining profits. It also makes economists vulnerable to ridicule.

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Managerial Economics: Meaning, Scope, Techniques & other Details

role of managerial economics in decision making process

All these decisions and arbitrations are possible when there is an active role and exercise of managerial economics which automatically affects the decisions related to cost control. The buying of goods, sale of goods, payment of cash, receipt of cash and similar dealings are called business transactions. The economy is good at the moment, but leading forecast a downturn in the fourth-quarter of the year — the quarter that includes the winter holiday season during which a large percentage of a firm's annual sales occur. Managers may seek to determine potential causes of a problem, the people and processes involved in the issue and any constraints placed on the decision-making process. It may seem strange, therefore, that we must ask this question at all. Computer is not only used for scientific or mathematical applications, it may also be used for some business applications, docu­ment generations and graphical solutions.

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