Characteristics of Managerial Economics

Characteristics of Managerial Economics

 (i) Micro-eco

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in character: As managerial economics concentrates only on the study of a firm, it is micro economics in character.

 (ii) Limited by macro economics

: The firm's operations are limited by the macro�economic conditions such as government, inflation etc. So it works against the backdrop of macro economics.

 (iii) Prescriptive actions

: Managerial economics is concerned only with those decisions, which are made to attain the objectives of the firm. It provides various alternatives so that the best choice can be made to achieve the objective of the firm. Thus it is goal-oriented.

 (iv) Part of normative economics

: It indicates only the possible consequences based on certain relations but it does not give the best choice.

 (v) Multidisciplinary:

The concepts, tools and techniques of managerial economics are drawn from different subjects such as economics, management, statistics, organizational behavior, etc.

(vi) Application in decision-making

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Managerial economics is judged by its ability to help the managers to mke better decisions. 'Models' are built to reflect the real�life complex business situations and case study methods are also employed to conceptualise the problem, identify the alternative and determine the best choice in decision-making

(vii) Evaluates every alternative: Managerial economics makes use of quantitative techniques to evaluate each alternative in terms of its costs and revenues. This helps the manager to decide the best alternative to achieve his objective of profit maximation

. (viii) Limitations: The assumption on which managerial economics is based is not universally valid. The theory fails when there is a change in assumptions.