It is the discipline that deals with application of economic concepts, theories and methodologies to practical problems of businesses/firms.

Subject that uses the theories of economics and the methodologies of decision sciences for managerial decision-making is known as managerial economics.

What is Managerial economics

Managerial economics is the science of directing scarce resources to manage cost effectively. It consists of three branches: competitive markets, market power, and imperfect markets. A market consists of buyers and sellers that communicate with each other for voluntary exchange.

Features of Managerial Economics

1. Micro economic character: Managerial economics is micro economic in character because it is a unit of study i.e. firm. It only deals the problems of firms but not deal with the entire economy as a unit of study. However, it takes the help of macroeconomic to understand and adjust to the environment in which the firm operates.

2. Choice and Allocation: Managerial economics is concerned with decision-making of economic nature. This implies that managerial economics deals with identification of economic choices and allocation of scarce resources.

3. Goal oriented: Managerial economics is goal-oriented and prescriptive. It deals with how decisions should be formulated by managers to achieve the organizational goals.

4. Conceptual and Metrical: Managerial economics is both ‘Conceptual and Metrical’. An intelligent application of quantitative techniques to business presupposes considered judgment and hard and careful thinking about the nature of the particular problem to be solved. Managerial economics provides necessary conceptual tools to achieve this. Moreover, it helps the decision-maker by providing measurement of various economic entities and their relationships. This metrical dimension of managerial economics is complementary to its conceptual framework.

5. Pragmatic: Managerial economics is pragmatic. It is concerned with those analytical tools, which are useful in improving decision-making. Economic theory appropriately ignores the variety of backgrounds and training found in individual firms but managerial economics considers the particular environment of decision making.

6. Normative: Managerial economics belongs to normative economics rather than positive economics. In other words, it is prescriptive rather than descriptive. The main body of economic theory confines itself to descriptive hypothesis, attempting to generalize about the relations among different variables without judgment about what is desirable or undesirable. Managerial economics firstly tells what aims and objectives a firm should pursue and secondly, it tells how best to achieve these aims in particular situations.

7. Multi-disciplinary: Managerial economics is related with different disciplines such as

Statistics, Mathematics, Management, Operational Research, Psychology etc.