How Managerial Economics helps in decision making in India?

How managerial economics helps in decision making in India
February 2, 2021
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Firms in India use the principles of managerial economics to help manage and increase their profits. In a broad sense, it is a concept that combines the issues that managers face in daily tasks. Much different analytics of the economic aspects and issues like demand, supply, cost, production, market, and price. These exist as some of the most important concepts in any real decision.

Definition of Managerial Economics

 Definition of Managerial Economics

It is a smooth blend of economic theories with their management aspects. It finds much use in policymaking. In other words, it is a mix of economics theory and managerial theory. It helps the manager in decision making and acts as a link between practice and theory.  No business is a lone wolf. It is often a combination of teams, departments, and individuals. This combination helps to improve efficiency and the working of any structure. Within these teams, firms often choose high performers and assign them the task of managing that team. Hence, managers are often in charge of setting goals for their team members. But, a more crucial task for them is to become the point of contact for their superiors, who seek timely updates on the works of different teams. Thus, managers also look after their team’s workings as well as for the financial aspects of their teams. The theory of the firm is a common tool for measuring the performance of companies. Based on an economic model, this theory helps big companies to take crucial decisions. The theory of the firm often helps the business make decisions about which market to enter, where to invest, or how and when to launch their products.


The way of managing the firm decides its success and failure. This observation made by many economists led to the creation of this discipline. The manager invokes a sense of leadership and guides his team during the project. One more goal which should is important for a firm to succeed is the knowledge of the economic aspects of the project.


Managerial economics is a proven concept and many big firms use it to better manage the different teams. The managers of the department and their heads look after the working of the company. Theorists have defined a set of rules for various problems using the principles which are helpful to better manage the efficiency of different teams and departments.

These are the four main aspects of decision making that help managers plan ahead for their team:

Aspects for decision making
  1. Resource Allocation: Resources always are the top concern for managers. It is often that most of them feel that their team has too little manpower to complete the task at hand. It is also one of the principles that allow the best use of the resources to complete the task.
  2. Inventory: Inventory allocation is another one of the major challenges. But, they must be on top of these aspects by analyzing the demand and supply models. Managers can get a better hold of management and transport of inventories by queuing products.
  3. Pricing: Fixing prices for the products in any firm is a crucial part of the decision making process. Pricing problems involve decisions about various methods of pricing that firms need to adopt.
  4. Investment: Managers must be aware of the future of their firms. In this manner, they can have oversight of falling prey to negative market forces. Thus, investment planning is of the pillars.

Steps for Decision Making

  • Problem Definition

Defining the problem is the first step in realizing the potential errors of the team. Managers must be aware of the problems and define them for faster resolution. Otherwise, the failure to define and identify the problem often derails projects. Important in economics.

  • Identifying the goal

Creating detailed goals of the firm may help managers later arrive at good results. Managers should know about the current strengths and weaknesses of the firm. Also, having knowledge of the chances that exist in the market makes up for a better realization of the goals.

  • Coming up with alternatives

It is not always that everything aligns as per the set goals. Markets are highly volatile and a slight change might impact heavily on the firm. Thus, managers must have a deep knowledge of the framework set by them. Also, they must then devise plans for all possible cases where changes might affect the project. A crisis management plan must be devised by the manager in order to not be heavily impacted by external changes.

  • Forecasting

The manager must work based on the crisis management plan. Also, they must be good at predicting the results of their decisions. In this way, the manager still is in charge of the situation. Also, things can be saved from going south even if a slight change in the market forces the team to adopt new ways.

  • Decision Making

Once all the inquiry is done then the preferred action is taken in this final step, the aims and the results are directly measurable. A crest to the plan set by the manager. The final step involves him/her making decisions for the team and the firm at large. These decisions are inspired by in-depth study and after weighing the pros and cons of the problem at hand, employing all the above steps in sequence.

Final Thoughts

So these are some of the ways how any firm works w.r.t its decision making processes and helps managers fully utilize their team and better manage the efficiency considering the management and financial aspects of the work.

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