Managerial Economics – Meaning and Definition

Managerial Economics

Meaning of Managerial Economics

Managerial economics is constituted of economic theories and analytical tools thus are widely applied to business decision making. It is therefore import and to understand “what is economics”. The term economics comes from the Greek word “oikos” (house) and “nomos” (custom or law). This marks the significance of economics to households. But economics is not limited to households and is equally relevant to managerial decision making.

Economics is a social science which studies human behavior in relation to  optimizing allocation of available resources to achieve the given ends. The subject matter of economic science consists of the logic, tools and techniques of analyzing economics phenomenon, evaluating economics options, optimization techniques and economic theories.

In its modern meaning, economics renders help in various matters of decision making like:

  1. Production decisions: What to produce, how much of a good to produce and how to produce a given quantity of the chosen good?
  2. Exchange decisions: Who is the target group of buyers for each product at what price?
  3. Consumption decisions: What and how much to buy and consume ?

Economic laws and tools of economic analysis are now applied in the process of business decision making. This has led to emergence of a separate branch of study called managerial economics. Economic theories and techniques are applied to analyse business problems, evaluate business options and opportunities with a view to arriving at an appropriate business decision. Managerial economics is thus constituted of that part of economic knowledge, logic, theories and analytical tools that are used for rational business decision making.


  1. Managerial economics is the application of economic theory and methodology to decision making problems faced by both public and private institutions.

                                                                                                                                -McGutgan and Moyer

  1. Managerial economics is concerned with the application of economic principles and methodologies to the decision process within the organization. It seeks to establish rules and principles to facilitate the attainment of the desired economic goals of management.


  1. Managerial economics is the fundamental academic subject which seeks to understand and to analyse the problems of business decision taking.

                                                                                                                                  -D.C. Hayue

  1. Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.

                                                                                                                 -Milton Spencer and Louis Siegelman

  1. Managerial economics is the study of the allocation of the resources available to a firm or other unit of management among the activities of unit.

                                                                                                                                  -W.W Haynes

  1. Managerial economics concerns efficient direction of a business organization so as to make a productive enterprise out of human and material resources.

                                                                                                                                   -Savage and Small

  1. Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.

                                                                                                                                   -Spencer and Seigelman

Thus from the above definitions it can be concluded that Managerial economics is a science dealing with the application of the economic theory to business management. Managerial economics provides an insight into the application of economics to solving business problems. Managerial economics thus lies between economics and business management and serves as bridge between the two disciplines.
Economics, business management and managerial economicsDoc3_001

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