Concept of Managerial Economics/ What is Managerial Economics?

Economics is concerned with the allocation of scarce resources having alternative uses, among compacting goals (or unlimited wants.). Managerial economics studies the economic aspects of managerial decision-making. It provides the practicing manager with those tool and techniques, which are useful in day-to-day decision making. Like traditional economics, Managerial economics is concerned with choice and allocation, in a narrow sphere; it examines how scarce resources are allocated within a firm.
Managerial economics is pragmatic. Its stress is on the real business world. It is concerned with those analytical tools and techniques which are useful or are likely to be so as to improve the decision making process within the firm.
Firm of different types and size arise in an economy because they have been able to organize production more efficiently than other types of institution could. Most Production takes places in business firms. In managerial economics the stress is on the process of resources allocation and decision making within the firm, which is thought to be the most efficient form of organizing production.
The terms ‘Managerial’ economics and ‘business’ economics are often used interchangeably. But the scope of managerial economics is broader, than business economics. Business economics deals with the decision making in profit making organizations, the managerial provides methods and a point of view that are also applicable in managing non-profit organization (like hospital) and public corporations (Like Nepal Oil Corporation ). So, in a formal sense, Managerial economics is the application of economic theory and methodology to decision making problems faced by private, public and non-profit organizations. The implementation of cost reduction programmes, the selection o0f more productive alternatives, the enhancement of revenues and the adoption of other measures can help to maximize the service and the social contribution of these institutions. Government should try to obtain the maximum benefit for taxpayers in spending their revenues; government agencies can measure their efficiency through cost-benefit analysis. Hospital often attempt to handle more patients and give better care at lower cost by applying economic techniques. Even Universities can gain much by practicing what they teach about Managerial economics.