Studying Managerial Economics – How it Helps Business Administration Executives?

Businesses sell products and services to consumers. When a business decides to produce and sell a product or service it has to find a way to make optimum use of limited resources such as land, labor and investment. Questions such as ‘How much should I produce? What should be the price? What is the profit margin?’ spring up during the business planning phase. Though they may sound simple the answers to them are crucial for optimizing investment and maximizing profit. Theories and principles in business economics/managerial economics help us in getting answers to these questions. Knowledge of the theories and their application can help business administration executives and managers in recommending/making informed decisions about future path of the business.

Managerial Economics – How it Aids in Decision Making?

Business decisions related to products or services normally involve thorough market research and analysis of data. The ground reports from market research has huge amount of data which analysts should deal with. The analysts apply the principles and theories of managerial economics to come up with meaningful findings from the available data that can help business heads make informed decisions. The statistical records of the past, the current market scenario and various factors within the market, the forecast of demand, the competition and other factors are considered during the course to arrive at results.

Application of Managerial Economics – The Bigger Picture

Managerial economics plays a major role in big organizations where every business decision involves investments worth crores of rupees. Decisions such as adding a simple feature to a product, changing the product-line to make it more efficient, going for a new business strategy, increasing production require thorough study to ensure that the intended goals are achieved. The goal may not be limited to maximizing profit. It may be to capture certain market share, to increase sales, to lead the market or to simply add more value to the product at the same cost or optimal cost of production. Since the decisions can greatly affect the company, business heads may have managerial economists in their team or may themselves have the knowledge of principles of the subject. Managerial economists study the business environment. They consider a wide number of macroeconomic factors such as population growth and economic growth to study the market. This information will be helpful to them in recommending long-term goals for the business.

Studying managerial economics in Bachelor of Business Administration degree gives students the basic foundation on principles and techniques. Managerial economists go a step further to pursue advanced studies after their graduation and specialize in business economics area.

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