Managerial economics is also known as business economics and it is a type of microeconomics that is focused on applying the theories of economics straight to real life business. This application is done through statistical methods and can aid companies in making important financial decisions. The main role of managerial economics is to make the efficiency of a business' decision making to up so that their profits also go up.
Many of the skills and tool that are provided by managerial economics are designed to help companies make better investing decisions in the stock market and any capital investments. If the company is stuck making a decision then managerial economics will step in by helping to make that decision easier.
- Production and operations.
Managerial economics use and provide businesses with quantitative methods that can be used to analyze the efficiency of production and operations. This can be done through analyzing resources, economies of scale an optimizing schedules. There are also several other methods that can be used including operating leverage and marginal revenue and cost, although these are less commonly seen than the others. This service provided by managerial economics can increase profits whilst decreasing production cost.
One of the main services that managerial economics provides businesses is helping them to determine effective pricing strategies as well as correct levels of pricing that are appropriate for the products and/or services that are provided. Some of the common methods of analyzing are: Cost-plus pricing, value-based pricing and price discrimination.
Managerial economics also exists to help ever business reduce any risk that might occur due to uncertainty model or decision theory analysis. Potential exit scenarios can be established by heavily using statistical probability theory. The exit scenarios that are drawn up can then be used by that business when making difficult decisions.
