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Discuss the salient features and significance of managerial economics.

ANS:The salient features of Managerial Economics are as follows:

1. Managerial Economics is more realistic, pragmatic and highlights on


practical application of various economic theories to solve business
and management problems.

2. It is science of decision-making. It concentrates on decision-making


process, decision-models and decision variables and their
relationships.

3. It is both conceptual and metrical and it helps the decision-maker by


providing measurement of various economic variables and their
interrelationships.

4. It uses various macroeconomic concepts like national income, inflation,


deflation, trade cycles etc. to understand and adjust its policies to the
environment in which the firm operates.

5. It also gives importance to the study of non-economic variables having


implications of economic performance of the firm. For example, impact
of technology, environmental forces, socio-political and cultural factors
etc.

6. It uses the services of many other sister sciences like mathematics,


statistics, engineering, accounting, operation research and psychology
etc. to find solutions to business and management problems.
The following points indicate the significance of managerial economics in
its right perspective.

7. It gives guidance for the identification of key variables in decisionmaking process.

8. It helps the business executives to understand the various intricacies


of business and managerial problems and to make a right decision at
the right time.

9. It provides the necessary conceptual, technical skills, toolbox of


analysis and techniques of thinking and other such most modern tools
and instruments like elasticity of demand and supply, cost and
revenue, income and expenditure, profit and volume of production etc.
to solve various business problems.

10. It is both science and art. In the context of globalization, privatization,


liberalization and marketization and a highly competitive dynamic
economy, it helps in identifying various business and managerial
problems, their causes and consequence, and suggests various policies
and programs to overcome them.

11. It helps the business executives to become more realistic, responsive


and competent to face the ever changing challenges in the modern
business world.

12. It helps in optimum use of scarce resources of a firm to maximize its


profits.

13. It also helps in achieving other objectives of a firm like attaining


industry leadership, market share expansion and social responsibilities
etc.

14. It helps a firm in fore casting the most important economic variables
like demand and supply, cost and revenue, price, sales and profit etc.
and formulate sound business policies.

15. It also helps in understanding the various external factors and forces
which affect the decision-making of a firm.
Thus, it has become a highly useful and practical discipline in recent years
to analyse and find solutions to various kinds of problems in a systematic
and rational manner.

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