Managerial economics is the study of how scarce resources are directed most efficiently to achieve managerial goals. It is a valuable tool for analyzing business situations to take better decisions.
A close interrelationship between management and economics had led to the development of managerial economics. Economic analysis is required for various concepts such as demand, profit, cost, and competition. In this way, managerial economics is considered as economics applied to “problems of choice’’ or alternatives and allocation of scarce resources by the firms.
Managerial economics is a discipline that combines economic theory with managerial practice. It helps in covering the gap between the problems of logic and the problems of policy. The subject offers powerful tools and techniques for managerial policy making.
To quote Mansfield, “Managerial economics is concerned with the application of economic concepts and economic analysis to the problems of formulating rational managerial decisions.
Spencer and Siegelman have defined the subject as “the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.”