Managerial Economics

Introduction: Every day managers make many decisions that affect the survival prospects of their firm. These include deciding how much of a particular product to produce, what price to charge for that product, hiring additional workers, how much effort should be invested in developing new products or improving the production process, and what amount should be bid in an auction. An understanding of economic concepts can improve such decision making within a firm.� Acs Zoltan and Daniel Gerlowski writing in Financial Practice and Education note that managerial economics courses in most business schools blend topics from microeconomics and the decision sciences in recognition of the firm's role as a production and decision unit. As competition becomes more complex, the transaction and coordinating costs of economic activity are becoming an increasingly more important part of the management and decision making process. The authors suggest that managerial economics should move away from its exclusive focus on the firm as a production unit, and toward a model in which the firm is a transacting and coordinating unit (Acs & Gerlowski 125).

Managerial economics is concerned with the application of economic principles and methodologies to business decision problems. Managerial economics links economic concepts with quantitative methods to develop vital tools for managerial decision making. The basic concepts of managerial economics are derived mainly from mic

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better than "nothing." Business executives spend a great deal of time determining how much risk they can handle, how to spread it around and when it is time to back out of a deal (Sperling 19). An article in USA Today Magazine suggests that risk taking was a vital part of the last economic revival in the mid 1990s. Currently, few businesses and individuals are interested in taking any great risks in the present economic climate. The article adds that a time when indications of a strengthening economy should be prompting people and companies to take risks, they appear to be going in the opposite direction. This will not bring the recovery to a halt, but it will certainly keep America's economic recovery in the slow lane ("Risk Aversion Slows Recovery" 11). A business decision maker may attempt to deal with uncertainty by seeking additional information about outcomes or their probabilities of occurrence. However, after all available information is acquired and there is a persisting aura of uncertainty, the decision still has to be made. The decision maker's attitude toward risk and uncertainty and the additional research helps create decision making criteria. Decision makers' attitudes toward risk vary widely. Most individuals w

Category: Economics - M