Check out the managerial economics definition, importance and models including the analysis of regression and risk that you should know.
The Meaning of Managerial Economics
In a nutshell, managerial economics is an economic theory concerned with how the business can minimize input while maximizing output. It is applied micro economics that focuses on the field of economics that is very important for the purpose of facilitating decision making and planning by management. It includes production, demand, pricing, cost, market structure and government regulations.
Importance of this Economic Theory
This type of economics applies to several important factors that you should know. These include the making of business decisions such as the choices of product manufacture, the volume of goods for production, the most ideal production method, the way the products for distribution and marketing. In addition, it is very important because it enables businesses to make the best use of available resources by cutting down production costs while at the same time maximizing the output. As such, it is valuable in the integration of economic theory with business. Resources could be material or employees.
Models of managerial economics
There are various models that people use in this scope of managerial economics to facilitate the decision making process and forward planning. For example, they use regression analysis to determine the effect of a change such as the effect of price change on demand. They use Production functions to determine the optimum level of production that the company will gain maximum profit, while analysis of risk evaluates the shortcomings that the company may face in the realm of business. Such economic analysis make for best business practice. These economic principles form an important part in the application of economic theories. They play an important part in managerial decision making geared toward business success.