03: Scope of Managerial Economics

Focus

Microeconomic Decision-Making

Focus: Microeconomic Decision-Making

Managerial Economics has a narrower scope, applying microeconomic principles to solve organizational problems. It guides managers in making efficient decision amid resource scarcity; balancing needs across customers, suppliers, competitors, and internal operations.

Core Questions from Scarcity

1. What to produce?

2. How to produce?

3. For whom to produce?

Managerial Economics (Definition)

the application of microeconomic principles to business decision-making.

Managerial Economics (Role)

• Uses economic tools to guide business and administrative decisions

• Helps managers understand how economic forces impact the organization

• Explains the outcomes of managerial choices

• Integrates economic theory with quantitative methods to support effective decision-making

Usefulness of Managerial Economics

1. Evaluating Choice Alternatives

2. Making the Best Decision

   • Broad Applicability

Evaluating Choice Alternatives

• Understand how economic forces impact business operations

• Anticipate the consequences of managerial decisions

• Apply economic concepts, data, and quantitative tools to guide choices

• Identify efficient strategies to achieve organizational goals

It serves as a decision-making framework that blends analysis with practical action.

Making the Best Decision

Managers must understand their economic environment to create effective decision rules. Managerial Economics provides the tools to apply economic theory and methods to real-world management challenges.

Broad Applicability

• Government agencies

• Cooperatoves

• Schools and hospitals

• Museums and other non-profits

Managerial Economics supports sound decision-making across all types of organizations.