What Are Managerial Economics With Examples?

Managerial economics is one of the economic concepts. It is explained as the integration of economic theory with business processes. This makes the decision-making process easier for organizations, as they can use economic concepts to reverse market volatility.

Managerial Economics

The administrative economy is regarded as an important sector of education, and this economic sector reflects many factors that makes it very important for businesses. Management economics is no different from science as it fulfills the conditions of being a science.

Organizations use management economics to solve many business problems. It is also regarded as the breadth of economic management. Ready to read? Let’s start with the scope of economic management and understand its use in the business world.

What is Managerial Economics?

Management economics is a study that Joel Dean first developed in 1951. This sector of economics is concerned with the application of different economic concepts in decision-making.

We can also look at management economics as a problem-solving economy at the factory level. Management economics serves as a bridge between economic theory and business processes, and it is based on economic analysis to identify problems, organize information, and explore alternatives.

Resource allocation is a major challenge for any organization. Managing economics involves analyzing the distribution of resources available to a company or the management unit between the functions of that unit. It applies economic theories and ideas and assists managers in making informed decisions.

What is the Scope of Managerial Economics?

Management economics is an evolving subject, and its nature of intelligence and vision expands its scope. It serves as a business tool to understand market performance and the ever-changing market lifestyle.

It is a critical skill to master in MBA for working professionals. The course is mostly analytical, emphasizing explaining basic ideas from a microeconomic standpoint.

The management economy assists with almost everything from demand analysis and forecasting future demand to capital management. It also assists companies in pricing decisions, policies, and procedures, analyzing costs and production, and managing their profits.

Micro-Economics Used in Business

To solve internal organizational problems arising from business operations, theories or various microeconomics principles used are as follows:

  • Demand Theory: Demand theory focuses on consumer behaviour toward a product or service. It considers consumers’ needs, requirements, preferences, and needs to improve the production process.
  • Production and Production Decision Theory: This view focuses on production volume, process, the cost required and labor required, costs involved, etc. It aims to maximize products to meet customer needs.
  • Pricing Theory and Market Structure Analysis: Focuses on product pricing keeping in mind competitors, market conditions, production costs, increasing sales volume, etc.
  • Profit and Management Analysis: Organizations work for a profit. So they always aim to maximize profits. Depending on market demand, input costs, competitive level, etc.
  • Theory of Capital and Investment Decisions: Capital is an important aspect of a business. This theory governs the proper allocation of organizational funds and investments in profitable projects or campaigns to improve organizational efficiency.

Nature of Managerial Economics

To know more about administrative economics, we need to know its various features. Let us consider the nature of this concept in the following points:

Arts and Science: Management economics requires a lot of logical thinking and creative skills to make decisions or solve problems. It is also considered a science as it relies on applying different economic principles, strategies, and methods to solve business problems.

Micro Economics: In administrative economics, managers often deal with problems related to a particular organization instead of the whole economy. It is therefore considered part of microeconomics.

Using Macro Economics: A business operates in an external environment, i.e., a market, which is part of the economy as a whole.

Therefore, managers need to analyze the various aspects of a large economy, such as market conditions, economic reforms, government policies, etc., and their impact on the organization.

Multi-disciplinary discipline: Uses many tools and principles for different fields such as accounting, finance, mathematics, mathematics, manufacturing, job research, human resources, marketing, etc.

Fixed / Normal Discipline: We aim to achieve a goal and address real-life situations or problems through corrective action.

Management focus: It serves as a tool in the hands of management to deal with business-related issues and uncertainties. It also provides for goal setting, policy formulation, and effective decision-making.

Pragmatic: It is an effective and sensible way to deal with everyday business problems.

Some Examples

You can use different economic management tools to achieve all the business organization’s objectives effectively. Examples are:

  • The management economy finds its use in determining the price of a product.
  • It also helps firms decide whether to make a product or buy it from another manufacturer.
  • Determining the production strategy to be used in the production of the product
  • It also helps with asset management. The firm can decide on the level of innovation that will keep the product or raw material.
  • Decide on the marketing media and the strength of the advertising campaigns.
  • Management economics is used by businesses to determine employment and training.
  • After all the analysis, management is looking at additional investment opportunities.

It is the method to use economic models and theories. The following are illustrative examples:


Use of supply and need models to set prices. A pricing strategy may also be based on various economic concepts such as a price signal, a fixed price, or a price umbrella.

Business Models

How a company develops and extracts value is referred to as a business model. This is always based on economics, such as a theme park that uses club theory or a social media corporation that uses the network effect to generate value.


Supply and demand projections are used to organize activities like factories.


Economies of density are used to plan distribution aspects such as warehouses, retail sites, and product showcases.

Bottom Line

Managerial Economists are a must for all businesses, and they are the future leaders for reputed companies. They look for talent that can help manage their finances and investments and help their company grow in the market. These people are highly sought after for their skills in analyzing trends and market processes.

In terms of scope, the online management courses in this field lead to a well-respected and highly paid job within the business environment. People looking for this profile need to build their skills in economic theory and the world of Arts and Sciences to acquire rational and creative thinking and leadership training. If you are willing to learn these skills, the next step will be much easier.