Managerial economics is also known as business economics. It is a branch of economics which connects economics to economic theory. It is used to apply microeconomic analysis with decision methodology of business and other management units. According to definitions, managerial economics is an integration of economic theory with business practices to help the management in decision making and strategy planning for future. Managerial economics can also be described as the study of economics by managers, aggregate economic activities, how managers make decisions and use of the sources. It is used to analyze the business decisions and its impact on business and it uses complex mathematical calculation formula, game theory, decision trees and capital asset pricing model (CAPM) to help the organizations management.
Managerial economics is used to optimize the business decisions in favor of organization and its objectives. It works like a combination of practical economics with traditional economic theory in the everyday business environment and provides quantitative analysis of business by using the mathematics such as risk analysis, production analysis, capital budgeting, pricing analysis, etc. It is used to get help in the business operation of business and organizations.
It evaluates the organization from the eye of administrator and sets a discipline to maximize the efficiency and intelligence of management decisions. It focuses its concentration on various economical issues and attempts to analysis the several types of accounting techniques, operation research and other fields of economics. It assists managers to understand the influencing factors of the business operation as well as their economics. Managerial economics also helps to identify the problems solving methods for smooth functioning of business and find the responsible causes and factors behind the business activities. Managerial economics can be understand as a theory of microeconomics to equip the manager with tools and techniques to utilize intelligent business techniques.
Besides this it tries to know the behavior of business market, strategy profile of the competitors and business environment so that it can be assured the growth of the business. It is a study of managerial skills and helps to overcome from obstacles and problems of business. Managerial economics is applied to study the risk analysis, production analysis, pricing analysis and capital budgeting as well as other operational issues such as demand analysis and forecasting, cost and production analysis, pricing decisions and policies, capital, resources and profit management and strategic planning.