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What is the role of managerial economics in different functional areas of business? Managerial economics
Managerial economics, or business economics, is a division of microeconomics that focuses on applying economic theory directly to businesses. The application of economic theory through statistical methods helps businesses make decisions and determine strategy on pricing, operations, risk, investments and production. The overall role of managerial economics is to increase the efficiency of decision making in businesses to increase profit

Role of managerial economics

Managerial economics helps the management in analysis and highly developed techniques in solving complex issues of successful decision making and future advanced planning. The role of managerial economics can be summarized as follows. It helps to study the economic patterns at macro-level and analysis its significance to the business It helps in examining the probabilities of transforming an ever-changing economic environment into profitable business avenues. It helps in planning processes of the business. It helps in cost-benefit analysis of any project of the business. It plays a vital role in decisions pertaining to internal functioning of a firm such as changes in price, investment plans, types of goods/services to be produced, inputs to be used, techniques of production to be used, expansion/contraction of the firm, allocation of capital, location of new plants, sales forecasting, inventory forecasting, etc. It helps management in analyzing changes in macro-economic indicators such as national income, business cycles, population, and their possible impact on the firms functioning. It also plays a vital role, as it advices the management on public relations, foreign exchange and trade. It also guides the firm on the likely impact due to changes in monetary and fiscal policies on the business. It is also used to make economic analysis of the firms in competition and collects crucial information of the environment in which the firm is operating. It helps in decisions relating to expenditures regarding marketing campaign of the business. How much expenditure to be made for hiring new employees? This question is also answered by managerial economics. It also guides the economic way to retain the employees by giving them such compensation which is prevailing in the market, in order to avoid the rehiring costs.

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Case: The management revolution How decision making is revolutionized? Introduction: In todays world business society has been revolutionized which caused an in-turn revolution of management. Management has to take many decisions. All decisions of management are influenced by following four components of revolution. Globalization of market Spread of information technology Computer networks Spread of information economy

Globalization of markets: Globalization of markets means the more integration of international markets and increased interdependency upon one another. Managers have to make decisions while keeping in view of a global market and also strong competition. Because of improved communication and

transportation, national products becoming international e.g. Mcdonalds, KFC etc. local producers are facing continuous competition from abroad.
Spread of information technology: Another thing which revolutionized the todays management is the wide spread of information technology. As everyone related to any field is using computers and internet to facilitate his work. This immensely speeds up the delivery of goods, cuts wastes and costs, and increases productivity. Managers, make sure that their workers are familiar to the information technology in order to stand in the market with the competitors. Computer networks: Computers plays a great role in revolutionizing todays management. In early days middle managers used as transmission line between top management and workers, but now with the help of computer networks top management can communicate directly with workers and can save a lot of time and costs. Decisions can be implemented quickly as transmitted directly to the workers from the top management. Information economy: Final component of the revolution is information economy, in which creation of value based communications and knowledge rather than physical labor and natural resources. Jobs which are labor intensive earlier are becoming labor free because of automated programs, which increases the level of production and improves the quality of products. Managers have to design their production/delivery process efficiently. 3|Page