Managerial economics

Managerial economics (sometimes referred to as business economics), is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units. As such, it bridges economic theory and economics in practice. It draws heavily from quantitative techniques such as regression analysis and correlation, Lagrangian calculus (linear). If there is a unifying theme that runs through most of managerial economics it is the attempt to optimize business decisions given the firm's objectives and given constraints imposed by scarcity, for example through the use of operations research and programming.

Almost any business decision can be analyzed with managerial economics techniques, but it is most commonly applied to:

• Risk analysis - various models are used to quantify risk and asymmetric information and to employ them in decision rules to manage risk.
• Production analysis - microeconomic techniques are used to analyze production efficiency, optimum factor allocation, costs, economies of scale and to estimate the firm's cost function.
• Pricing analysis - microeconomic techniques are used to analyze various pricing decisions including transfer pricing, joint product pricing, price discrimination, price elasticity estimations, and choosing the optimum pricing method.
• Capital budgeting - Investment theory is used to examine a firm's capital purchasing decisions.

At universities, the subject is taught primarily to advanced undergraduates and graduate business schools. It is approached as an integration subject. That is, it integrates many concepts from a wide variety of prerequisite courses. In many countries it is possible to read for a degree in Business Economics which often covers managerial economics, financial economics, game theory, business forecasting and industrial economics.

See also

• Business economics
• Personnel economics
• Management science

Managerial economics is the study of the economy through the managers point of view.

Finding related topics

• list of economics topics
• list of finance topics
• list of international trade topics
• list of production topics
• list of accounting topics
• list of management topics
• list of human resource management topics
• list of marketing topics
• list of information technology management topics
• list of business law topics
• list of business ethics, political economy, and philosophy of business topics
• list of business theorists
• list of economists
• list of corporate leaders

References

• William J. Baumol (1961) "What Can Economic Theory Contribute to Managerial Economics?," American Economic Review, vol. 51, no. 2, May 1961, pp 142-46.
• Alan Hughes (1987). "managerial capitalism," The New Palgrave: A Dictionary of Economics, v. 3, pp. 293-96.
• Ivan Png (2002) Managerial Economics. Malden, MA: Blackwell. Arrow-page searchable contents.
• Edward Lazear (2008). "personnel economics," The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.
• Keith Weigelt (2006). Managerial Economics
• Elmer G. Wiens The Public Firm with Managerial Incentives
• NA, (2009). "managerial economics," Encyclopædia Britannica. Cached entry.

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