There is a detailed introduction of the concept of Business Economics in this slides.

1. Business or Managerial Economics:
Meaning:
Managerial Economics is a field in applied economics
which uses economic theory and quantitative methods
to analyze business phenomena.

2. Definitions of Managerial Economics
• According to Prof. Spencer Sigelman, Managerial Economics deals
with integration of economic theory with business practice for the
purpose of facilitating decision making and forward planning by
management.
• According to Prof. Hauge, Managerial Economics is concerned with
using logic of economics, mathematics & statistics to provide effective
ways of thinking about business decision problems.
• According to Prof. Joel Dean, The purpose of Managerial Economics is
to show how economic analysis can be used in formulating business
policies.

3. Nature and characteristics of Managerial Economics:
1. Microeconomics: It studies the problems and principles of an individual
business firm or an individual industry. It aids the management in
forecasting and evaluating the trends of the market.
2. Normative economics: It is concerned with varied corrective measures
that a management undertakes under various circumstances. It deals with
goal determination, goal development and achievement of these goals.
Future planning, policy‐making, decision‐making and optimal utilization of
available resources, come under the banner of managerial economics.
3. Pragmatic: Managerial economics is pragmatic. In pure micro‐economic
theory, analysis is performed, based on certain exceptions, which are far
from reality.
.

4. 4. Uses theory of firm: Managerial economics employs economic
concepts and principles, which are known as the theory of Firm or
'Economics of the Firm'. Thus, its scope is narrower than that of pure
economic theory.
5. Takes the help of macroeconomics: Managerial economics
incorporates certain aspects of macroeconomic theory. Knowledge of
macroeconomic issues such as business cycles, taxation policies,
industrial policy of the government, price and distribution policies,
wage policies and antimonopoly policies and so on, is integral to the
successful functioning of a business enterprise.
6. Aims at helping the management: Managerial economics aims at
supporting the management in taking corrective decisions and charting
plans and policies for future.

5. Scope of Managerial Economics
The scope of Managerial Economics is so wide that it embraces almost all the
problems and areas of the manager and the firm. It deals with demand
analysis and forecasting, resource allocation, production function, cost
analysis, inventory management , advertising, price system, capital budgeting
etc. However, the scope of managerial economics may be discussed under
following points:
a) Demand analysis and forecasting :
Demand forecasting is the process of finding the values for demand in future
time period. The current values are needed to make optimal current pricing
and promotional policies, while future values are necessary for planning
future production inventories, new product development etc. Correct
estimates of demand is essential for decision making , strengthening market
position and enlarging profits.

6. b) Cost and Production Analysis:
Production deals with the physical aspects of the business investment.
It is the process whereby inputs are transformed into outputs.
Efficiency of production depends on ratio in which various inputs are
employed absolute level of each input and productivity of each input. A
production function is the relation which gives us the technically
efficient way of producing the output given the inputs. The firm must
undertake cost estimation and forecasting to judge the optimality of
present output levels and assess the optimal level of production in
future.

7. c) Inventory Management:
It refers to stock of raw materials which a firm keeps. If it is high, capital is
unproductively tide up which might, if stock of inventory is reduced, be
used for other productive purpose . On the other hand, if the level of
inventory is low, production will be hampered. Hence, managerial
economics with methods such as ABC analysis a simple simulation exercise
and some mathematical models with a view to minimize inventory cost.
d) Advertising:
Managerial economics helps in determining the total advertising cost and
budget, the measuring of economic effects of advertising and form an
integral part of decision making and forward planning.
e) Market Structure and Pricing Policies:
Managerial economics helps to clear surplus and excess demand to bring
market equilibrium as there is continuous changes in market. Success of
business firm depends on correctness of price decisions. Price theory
works according to the nature of the market depending on the number of
sellers, demand conditions etc.

8. f) Resource Allocation:
Managerial economics with the help of advanced tools such as linear
programming are used to arrive at the best course of action for the
maximum use of the available resources and its substitutes.
g) Capital Budgeting:
Capital is scarce and it costs something . Hence, managerial economics
helps in decision making and forward planning on allocation of capital to
various factors of productions , marketing and management.

9. For Explanation of this topic in briefly……
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