Objectives and Uses of Managerial Economics

What are the objectives and uses of managerial economics? Joel Dean answers this question in the following words: "The purpose of managerial economics is to show how economics analysis can be used in formulating business policies." Success in business depends to a large extent on policies and strategies adopted in business. The basic objective of managerial economics is facilitating formulation of appropriate policies and strategies. This basic...

Read More

Producer's Equilibrium

Equilibrium is a position of rest; a state of no change. A producer will be in equilibrium when he does not desire a change from his current level of production. Naturally, this will be the position of maximum profit. When a producer is earning maximum profit, he will not have any desire to change that level of output. Therefore, producer's equilibrium is at the point of maximum profit.                ...

Read More

Long Run Costs

In the long run, all inputs are variable. Fixed factors have relevance only in the short-run. If the horizon enough. the producer can change all fixed factors to variable factors. In the long run are no TFC or AFC curves Similarly there is no distinction total costs and total variable costs. We need just refer to total costs. It is also to be borne in mind that there is no distinction between average total costs and average variable costs. Instead...

Read More

Monopolistic Competition

Monopolistic competition is a market situation characterised by competition among fairly large number of firms selling differentiated products which are cose substitutes Monopolistic competition is a form of imperfect competition and can be found in many real world markets ranging from clusters of sandwich bars, other fast food shops and coffee stores in a busy town centre to pizza delivery businesses in a city or hairdressers in a local area. Monopolistic...

Read More

Equilibrium in the Long Run

We have seen that under perfect competiton, firms will make only normal profit in the long run. Freedom in the long run. Freedom of entry and exit will ensure that there will be only normal profit in the long run. A firm under perfect competition is only price a price taker. Under monopoly the firm is a price maker. This is the reason why consumers prefer competition. This is the reason why governments are enacting policies that control monopolies...

Read More

Demand Forecasting for New Products

Demand forecasting for new products is a challenging task. Here, there is no reliable data to base demand calculations. Experiences of other firms also are not available  Therefore, firms introducing new products will have to rely on new techniques of demand forecasting. The important methods of demand forecasting for new products are the following: 1. Test marketing : This is a proven method of demand forecasting for new products Test...

Read More

Demand Estimation

An estimate is forming a tentative idea of the future. Demand estimation is an attempt to arrive at future demand. As the name implies demand estimation is an attempt to have a probable idea of the future demand situation. In all kinds of businesses businessmen try to estimate future demand based on their past experiences. in the case of products with seasonal demand it is possible to arrive at a near accurate idea of demand based on past experiences....

Read More

Definition and Characteristics of Managerial Economics

The term managerial economics was coined by Joel Dean, in 1951 Joel Dean wrote a book titles Managerial Economics. As the term implies, managerial economics is economics applied in business management. The purpose of the managerial economics is to show how economics analysis can be used in formulating business policies Definition of Managerial Economics: Let us examine some of the important definitions of managerial economics. According to...

Read More