Characteristics of Managerial Economics
Following are the characteristics of Managerial Economics:
Managerial economics in character as it is concerned with smaller units of the economy. It studies the problems and principles of an individual business firm or an individual industry. It assists the management in forecasting and evaluating the trends of market.
- Normative economics
Managerial economics belongs to normative economics. It is concerned with what management should do under particular circumstances. It determines the goals of the enterprise and then develops the ways to achieve these goals. It deals with future planning, policy making, decision making and making full utilization if available resources of enterprise.
Managerial economics is pragmatic. It tries to solve the managerial problems in their day to day functioning and avoids difficult issues of economic theory.
- Uses theory of firm
Managerial Economics uses economic concepts and principles which are known as the theory of firm or economics of the firm. Thus, its scope is narrower than that of Pure Economic theory.
- Takes the Help of Macro Economics
Managerial Economics takes the help of Macro-economics also because it needs an understanding of the circumstances and environment in which an individual firm or an industry has to work. Issues of Macro-economics whose knowledge is necessary for the successful management of a firm or an industry are : Business cycles, Taxation policies, Industrial Policy of the government, Price and distribution policies, Wage policies and anti- monopoly policies etc.
- Aims at helping the management
Managerial economics aims at helping the management in taking correct decisions and preparing plans and policies for future.
- Prescriptive rather than descriptive
Managerial economics is a normative and applied discipline. It suggests the application of economic principles with regard to policy formulation, decision making and future planning. It not only describes the goals of an organization but also prescribes the means of achieving these goals.
- A scientific art
Managerial economics is called as scientific art because it helps the management in the best and efficient utilization of scares economic resources. It assists the management in finding out the most feasible alternative. Managerial economics facilitates good and result orientated decisions under conditions of uncertainty.