How Does Economic Theory Contribute To Managerial Decisions? In the thriving corporate world, decision-making plays a critical role in getting ahead on the corporate ladder. Managers must make correct decisions in the allocation and availability of scarce resources. Resources are very limited, and the managers need to fully know the organization’s wants and needs and allocate the resources accordingly. Hence, it is important to understand managerial economics and its relationship to microeconomics and other related studies such as finance, marketing, etc.
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Managerial Economics In Decision Making
“When too much time is taken to make a correct decision, it has to be remembered that even a correct decision is wrong when it is taken too late.”
Hence, Decision-making is a crucial aspect of the business organization. Sometimes information for decision-making is fully available or partly available, or sometimes no information is available. The less information, the higher the risk in decision making. Hence while making decisions, we need to be sensitive and situation-based.
Managerial economics is a study of the behavior of human beings in producing, distributing, and consuming material goods and services in a world of scarce resources. Hence, using economic analysis, managers can make decisions involving the best use of an organization’s resources. As a business unit, the manager decides to use given resources for the best cause and ultimately reap the desired result for the organization. Managerial economics uses both economic concepts and quantitative approaches to make managerial decisions. You can check out the Management training programs to explore more about the subject.
How Does Economic Theory Contribute To Managerial Decisions? Managerial economics with other areas:
1. Managerial economics in relation to finance:
Budgeting is critical, and hence to reap maximum benefits, the right budgeting is important. Managerial economics helps to understand how budgeting is to be analyzed and the breakeven analysis of opportunity costs.
2. Managerial economics in relation to marketing:
The distribution and marketing model selection of decisions is important to maximize revenue. Managers can forecast a study of economic theory like demand theory and price elasticity.
3. Managerial economics in relation to management accounting:
Every organization seeks to have products at low cost with Max profit, and the decision regarding the variable and fixed costs is crucial. Thus, by the theory of cost accounting, such can be performed.
4. Managerial economics in relation to managerial science:
The study of Theories such as linear programming, regressive analysis, and forecasting helps in the best and correct decision-making by managers.
And in many related areas, the study of economic theory helps.
The study of economic theory helps in decision-making. Every stage of the decision-making process is as follows:
Stage 1:
The process of how determining and defining the objective.
Stage 2:
The scenario and solutions to the scenario of business-related issues.
Stage 3:
How to collect and analyze related data
Stage 4:
The course of action to be taken is based on the data gathered.
Stage 5:
When, where, and how to implement the decision.
Hence the economy revolves only around the following factors such as competitors, technology, and customers. Hence, it is important to make quick and wise decisions based on the above requirements.
Application Of Economic Theory In Decision Making
The study of economic theory helps in the real-life application in:
- Selection of products:
In taking the decision, the manager’s decision-making is useful.
- Selection of suitable product mix:
Theory of contribution is always important in product mix
- Selection of the method of production :
In selecting, managers need to apply economic theory like the theory of contribution, production function, etc.
- Product Line decisions:
Study Theory of demand theory of Contribution is important in product decisions.
- Determination of price and quantity:
Economic theory suggests price theory, production theory, the concept of elasticity, the law of DMU, law of time perspective extra helps in the determination of price and elasticity.
- Decision on promotional strategy:
Responsiveness of sales to advertising with the help of the concept of elasticity, equi-marginal principle, and theory of contribution by which the optimum advertisement budget can be formalized.
Demand for Managerial Economics
The demand for this subject has increased post-liberalization and globalization primarily because of the increasing use of economic logic, concepts, tools, and theories in the decision-making process of large multinationals.
Also, you can apply this to increasing demand for professional management personnel, who can leverage limited resources available to them and maximize returns with efficiency and effectiveness.
The managers must answer the questions asked by the HR dept and such other related dept. Hence at great learning, the scholars are trained to answer such questions with great composure.
Such questions include –
1. What is the economic structure in our particular market, whether monopolistic, oligopolistic, or any other market structure?
2.Should our firm be in this business? If so, what will be the price output?
3.What is the economic condition in our particular market, and whether any government regulation is involved?
4.What are our standards for maintaining a competitive advantage in the market? Whether the focus is on a niche market or any mainstream segment of markets.
So these are some of how any firm works w.r.t its decision-making processes and helps managers fully utilize their team and better manage the efficiency considering the management and financial aspects of the work.
Hence taking up a BBA online course at Great learning is a wise choice. Scholars will achieve their dream of becoming top managers at the corporate level. It is one of the most prominent and well-known courses in the industry. All classes are live instructor-led delivered by trainers with rich domain experience. The institute is glued with exceptional training and certification that can uplift your career to the next level. With exhaustive notes and practical discussing examples, providing video assistance, quizzes, scenarios-based teaching, and all these combinations will help you prepare for exams. The advantage to enrolling with Great learning is that they learn from the best in the industry and become a well-renowned manager. How Does Economic Theory Contribute To Managerial Decisions?
Why wait? Enroll in enriching and bringing the future.
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