In this post you will study scope of managerial economics. Study and make the proper notes grabbing full understanding of this topic.
SCOPE OF MANAGERIAL ECONOMICS
Scope of a discipline refers to the various concepts, laws and theories which are studied in that subject. The scope of managerial economics includes various concepts, laws, theories and methods of analysis which helps a business manager during the process of business decision-making. The scope of managerial economics is very wide and comprehensive.
SCOPE OF MANAGERIAL ECONOMICS
DEMAND ANALYSIS AND DEMAND FORECASTING
Demand Analysis and demand forecasting is an important tool of business planning. Demand Analysis deals with:
- Why do consumers buy a particular product?
- Which factors influence the decision of consumers whether to buy a particular product or not?
- Why do consumers change their demand according to changed circumstances?
Demand Forecasting is associated with predicting the demand of the product in the future. It helps in estimating the future requirements of the product accurately.
THEORY OF PRODUCTION
The managerial economics also covers the concept of production function. It studies the concept of total product, average product and marginal product. It explains the relationship of various inputs with the output. It helps in studying
- Change in output due to change in input of one variable factor.
- Change in output when all factors are variable.
It also deals with how output be maximised with the use of limited factors of inputs.
THEORIES OF COST AND REVENUE
Cost is the amount of expenditure incurred in producing the product. Managerial Economics studies the different types of costs like Total Cost, Average Cost and Marginal Cost. It also establishes the relationship between these types of cost.
On the same lines, the theory of revenue or income generation is also studied under the Managerial Economics. It throws a light on the concept of Total Revenue, Average revenue and Marginal Revenue and establishes the relationship among them.
MARKET STRUCTURE AND PRICE THEORY
In the sphere of managerial economics, market structure is studied which includes perfect competition, monopoly and monopolistic competition. The price determination under these markets is studied with the help of price theory. The firm must have the knowledge of price theory for formulating appropriate pricing decisions, policies and practices.
THEORY OF PROFIT AND PROFIT MANAGEMENT
Profit is the difference between the revenue and the cost. The amount of profit is also influenced by the factors like advertisement cost, sales volume, market structure, risk associated etc. The managerial economist makes use of Profit Management theory to estimates the profit and its proper utilization towards achieving business goals.
THEORY OF CAPITAL
Theory of capital is associated with deciding about the capital structure of the business. It involves taking the long term and short term capital decisions of the firm and determining the cost of capital. The managerial economist makes use of this information to plan the capital outlay as capital is an important input and one of the factors of production.
MACRO ECONOMIC ISSUES
Managerial economics also takes into consideration the macro economic issues i.e. the external factors that impact the business. There are various factors like economic system of the country, political instability, social factors, demographic factors, technological advancements etc. that impact the business operating in that environment.
MARKET MANAGEMENT
The market management is also covered under the scope of managerial economics. It includes the product competition, advertising, product design, market planning and techniques etc. An intelligent market management helps the firm to survive and grow.
