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INTRODUCTION to Managerial Economics

Managerial economics is that branch of economic which in some or the other way is related to decision making process of businesses, and exerts a great influence on how different strategies are formulated (Baye, 2010). Through it microeconomic analysis can be carried out, which will help management of an organization to understand the various market forces, evaluate them and be able to take decisions and develop strategies to grow as well as expand. In the current study, an attempt has been made so as to understand the relationship between strategies and managerial economics; and also how through it, business tactics can be implemented.


Relationship between managerial economics and business strategy

Managerial economics is that division of economics which is related to application of various concepts and techniques of economic analysis so that answers of various problems that the business organizations are facing can be determined. In this regard it may not be wrong to say that it is a way through which companies can conduct an analysis of different market forces, and then to get to solution of an issues (Fine, 2009). Managerial economics (ME) helps in applying the principles of microeconomic analysis and thus helps business organizations to reach to a decision or a conclusion.

In today’s extremely competitive business environment which is characterized to be extremely hostile, to stay ahead of the competitors, doing a micro economic analysis can prove to be very helpful to a firm. This is so because of reason that it will be a way through which the companies can evaluate the various market forces and also measure as to how they can impact the business operations (Hueting, 2011). It is a well known fact that for the contemporary business firms, it is crucial that they keep a constant eye on the market, so that it can be seen as to what all forces can have an influence over the company and also to what extent.



How managerial economics can be implemented in business situations

Managerial economics can be used at workplaces in helping the management in implementing the various strategies and plans. This means that through such an approach authorities can find ways through which they can take care of the various market forces and then execute the plan in the organization. One way through which it can help the firm is in the form of decisions related to production. In this regard it can be said that by conducting an analysis of the market and various forces that exist in it, the management will be able to determine demands of the customers and also carry out the production process (Caravle, 2002).

This is a very important decision that the authorities are required to take, because of reason that there are a lot of matters which have to be kept in mind, because of reason that the management has to decide what to produce; how to produce; for whom to produce; how much to produce, etc. For many companies, this is a very important decision which can be taken only through conducting a micro economic analysis or through the concepts and techniques of managerial economics.


Role of economics in implementing a business strategy

Executing a strategy in the organization is a very critical task and requires that utmost attention be paid to it by the management. For every business organization, no matter in what industry it is operating in, it is important to implement the strategies and be able to execute them (Golder and Gerard, 2004). This is so because of reason that it the only way through which an attempt can be made to influence brand image of the company and also the perception of customers. If whatever strategy the authorities have developed is not executed, then it will never be able to win over the customers and impact their buying behavior or decision making process.

In this regard it can also be said that it is one of those ways through which maximum impact can be yielded on the market. Many a times the concepts and theories of economics play an important role in implementation of the various business strategies. In this regard it may not be wrong to say that for ensuring survival of the company for a long term it is the only way through which they can be sure. There are a lot of factors and forces that the management of an organization has to be wary about in the process of implementing a formulated strategy, as there are numerous factors and forces that can impact it. If they are not evaluated and paid attention to, then there are chances that the firm will not be able to stand for too long in the market, or make an influence over its customers (Dittmer, 2005).


Business Strategy is that concept of business operations which requires utmost attention and care be taken by management and authorities of the organization. This means that it is such a procedure on which success and failure of the company is dependent to a great extent, as if it is not carried out properly, then there are very less chances that the organization will be able to sustain in the market for too long and even its very existence will be put into jeopardy.




  • Alcidi, C. and Gros, D., 2011. Great recession versus great depression: monetary, fiscal and banking policies. Journal of Economic Studies. 38(6).pp. 673-690
  • Baye, R. M., 2010. Managerial Economics and Business Strategy. 7th ed. McGraw Hill.
  • Buxey, G., 2005. Aggregate Planning for seasonal demand: reconciling theory with practice. International Journal of Operations & Production Management. 25(11).pp. 1083-1100.
  • Caravle, G., 2002. Equilibrium and Economic Theory. Routledge
  • Dittmer, T., 2005. Diminishing Marginal Utility in Economics Textbooks. The Journal of Economic Education. 36(4). pp. 391-399
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