Process of Decision Making in Managerial Economics
Economics can be defined as the study that relate to the manner in which communities as well as individuals make decisions to make use or their scarce resources in the attempt to satisfy insatiable needs (Bhata, 2008). The perceptions of resource scarcity as well as decision making are the pivot points to the studies of economics. Due to scarcity, on every occasion a choice is made to monitor one direction of achievement, a contrary choice is made to counter another direction of course of action, and as such any choices made entails a sacrifice action. It is worth noting that the community as well as individual cannot get all their requirements due to the scarcity of resources and hence the products and the services produced by the scares ingredients must also be scarce in supply.
Grasping the knowledge of managerial economics is significant in the attempt to answer queries like, what are the factors that determine a hopeful businesses or firms should venture a certain industry or otherwise venture into a manufacturing or producing new services and goods. Managerial economics is an important entity in the decision making processes. Managerial economics makes use of quantitative methodologies in the business choices while utilising economic strategies like supply as well demand, value pliability as well as marginal analysis. Managerial economics can be used to determine the right kind of venture a business can pursue, whether a company has the right stock for its investment or as whether a company can create new innovation for market venture (Bhata, 2008).
The main function of managerial economics is to evaluate the economic challenges that are presented to the business fraternity. Managerial economics is to incorporate the theory of economics to business practises as well as put into practise the economic methodologies and principles so as to solve the challenges faced in the various businesses. Economic managerial also has its objectives in managing a risk free as well as taking care of uncertainties in the businesses while focusing on maximisation of profit. The subject is also focused on aiding in the solving of factors such as governance in businesses as well as implementation of business policies and expansion plans of the business.
It is worthy to note that in the attempt to solve the challenges faced in the economic managerial decision making, it is necessary to sample up data to analyse with the focus of the business aims and objectives. The managerial economics is then important as it provides mechanisms in which are useful in the choices made in the businesses as well firms. Basic solutions to business management challenges can also be solved as it provides information for analysis as well as forecasting the business future. External as well as internal factors that affect the business directly or indirectly can also be determined.
There are some important factors to consider as the basis of managerial economic in the business or firms, the choice of product to be produced in the business or company, the choice of an appropriate product mix, the choice of the techniques involved in the production, the choice of product line, determination of the product price as well as quantity, the choice of the promotion techniques, the maximum input blend , strategies used in distribution of resources, choices of replacements, the choices to buy or to sell, the choices to import or to export, the choice of the business location and lastly the capital budgeting.
The range of the managerial economics is the subject is in which the study is to be carried out. The managerial economics is comprised of a large range compared to that of business economics on the grounds that managerial economics tends to cater for the decisional challenges related to the businesses as well as non-business institutions, business economics on the other hand caters for the challenges in the business organisations only. As such business economics tends to solve challenges of a business premise as well as profit focused institutions. On the other hand, managerial economics tries to solve challenges in a multidisciplinary of institutions such as hospitals, schools. Managerial economics is mainly concerned with two categories of choice establishment; internal concerns or functioning and external concerns or environmental.
The internal concerns are those factors that emerge in the businesses and are defined to be under the dockets of the management. These are issues that are answerable to the kind of products the business deals with, how the products are produced, the quantity of the produce as well as when the products are produced. The internal issues that may be observed by managerial economical are factors such as, demand examination as well as forecasting, the cost analysis, pricing choices, profit examinations, capital budgeting, the product as well as the supply analysis.
He external factors that may be of concern to the managerial economic can be defined as the general business surroundings in which business or the institution operates. A close look at the environmental factors would include factors such as the kind of the economic system that surrounds the firm or business, the kind of trends involved in the production of the goods, the rate of employment in the country, the income rates, the prices of goods and commodities in the same line as the good, the savings as well as the investments. Another factor to be observed is the fashion of the productive financial institutions such as banks, insurances facilities as well as financial; corporations. The functioning trend of foreign trade as well as their magnitude in the environment should also be taken into considerations. The operating government operating policies in the country is also an important factor to note, not forgetting the most common policy factors to take into considerations such as industrial, monitory, fiscal as well as price policies.
The position of a managerial economist is a significant position in playing of roles such as helping the management of an institution to resolve the challenges in the decision making as well as forward scheduling. A managerial economist has to analyse the internal as well as the external influences that affect the institutions while taking note of the decisions made. The managerial economist has to be in a position to cater for some basic factors such as, the possibilities of an increase or a decrease in the competition, the population drifts as well as the effects in the ability to purchase. What is the stability of the raw materials price? It is also the responsibility of the managerial economist to be able to make choices that relate to the internal factors that affect the firms.
The managerial economist can then be assumed to be concerned with issues such as sales determination, market availability, production strategies, economical evaluation in the related companies, investment assessment, the business security management examination, giving advices on trade as well as environmental examination. A managerial economist position is then focused on managing a targeted profit to the company, forecasting accurate prediction to the businesses, establishing as well as upholding connections with personnel’s as well as the data bases, it is also the duty of the managerial economist to maintain the management at an informed situation of any occurrence of the economic fashions. The management economist is also tagged with the preparation of speeches intended for the business executives.
It is important for the managerial economics to possess characteristics such as being a micro economic in charisma due to their duty of analysing the companies challenges while not taking the whole countries economy. With the use of the theory of the “theory of the firm” is the principle as well as concepts that guide the managerial economist. Another trait that is important to the managerial economist is the normative characteristic and not a positive economist. The position is management oriented as well as being useful in being prescriptive in the evaluation of challenges faced by the institutions (Sloman, & Sutcliffe 2004 p 79).
Managerial economics can as well be viewed as a decision making instrument as well as a forward arrangement. Decision making process in an important core portion of contemporary management and maybe the most significant duty of the business management position in the decision making process, where decision making can be define as the process of identifying one or a given sets of actions from a given number of varieties of choices(Mithani, 2010 p67).
Assets such as land, workforce as well as investments can be limited and as such can be engaged in substitute utilities and as such the subject of decision making is brought into focus. The managers of the industries as well as organisations are always subjected to deal with a wide variety of choices in the given capacities such as determining of prices, choosing from the wide range of products, cost management, capital management as well as the business expansion. It is the responsibility of a manager to make worthy decisions in the given wide range of varieties from where the current capitalsthat iscommonly used in the realisation of the aims and objectives (Sloman, & Sutcliffe 2004 ).
The processes that are involved in the decision make use factors such as the establishment of the business goals as well as the objectives of the business, the evaluation of the statement challenges to be faced. The availability of the list of substitutes to choose from, the ability to identify the best substitute from the available list and the ability to device as well as manage the substitutes those are to be chosen from (Trefor, 2004).
Forward planning on the other hand can be defined as a situation that determines the uncertain future. Businesses as well as companies are always in operation on the grounds of risk taking as well as uncertainty. A business can minimise the risks and the uncertainties it can be involved in by engaging in the process of precise projection as well as advanced preparation. The duty of the managerial economics position is to aid the manager in the controlling of the predicted occurrences as well as further exploration of the already present plants. The evaluation of the macroeconomics gives the managers an opportunity to have a clear empathetic of environs in which the business is thriving. The clear knowledge of the vast choices of the economic philosophies viz, the theory of demands, theory of supply, it is also important to note that the knowledge of the predicted planning as well as of demand and supply. It is then noted that managerial economics is very significant in the aiding of the managers in the decision of the future strategies that are to affect the business in the future (Trefor, 2004).
It can then be concluded that managerial economics is a very important source of analysis in the business sector and also a basic foundation of formulation of business policies that are important in the business sustainability. The principle as well as the techniques that are used in the business management can be described to be derived from a wide range of principles as well as strategies. It is the responsibility of the microeconomic strategist to come in and assist in the external factors such as price control, the supply and demand, cost characteristic in relation to the governing legalities, the concepts of elasticity (Mithani, 2010). It can then be observed that managerial economics forms a significant portion of the business economics. A managerial economics position in the business can also be concluded to be very significant in the formulation of the business guiding policies as they are more know ledged in the functioning as well as the techniques of an business economy (Sloman, & Sutcliffe, 2004).
Bhata, M. (2008). Managerial Economics and Financial Analysis. New York: BS Publications
Mithani, D. (2010). Managerial Economics. London: Himalaya Publishing House
Moschandreas, M. (2000). Business Economics. New York: Thompson Learning
Sloman, J., & Sutcliffe, S. (2004). Economics for Business. Pearson, NJ: Prentice Hall
Trefor, J. (2004). Business Economics and Managerial Decision Making. London: John Wiley & Sons,