7 Types of Managerial Economics You Need to Know
Managerial economics is the application of economic theory and analysis to business decision making. It helps managers to understand the trade-offs, costs, benefits, and incentives involved in various choices and actions. Managerial economics can be classified into different types based on the level of analysis, the scope of the problem, the nature of the decision, and the tools used. Here are seven types of managerial economics you need to know:
1. Microeconomic analysis
This type of managerial economics focuses on the behavior and performance of individual agents, such as consumers, firms, workers, and markets. It uses concepts such as demand, supply, elasticity, marginal utility, production function, cost function, profit maximization, and market structure to analyze how these agents interact and respond to changes in prices, incomes, preferences, technology, and regulations.
2. Macroeconomic analysis
This type of managerial economics examines the behavior and performance of the aggregate economy, such as national income, output, employment, inflation, interest rates, exchange rates, and economic growth. It uses models such as aggregate demand and aggregate supply, Keynesian cross, IS-LM, AD-AS, and Solow growth model to analyze how the economy is affected by fiscal policy, monetary policy, trade policy, and other external shocks.
3. Decision analysis
This type of managerial economics applies mathematical and statistical techniques to evaluate different alternatives and outcomes under uncertainty and risk. It uses tools such as decision trees, expected value, expected utility, variance, standard deviation, coefficient of variation, sensitivity analysis, scenario analysis, and simulation to help managers choose the best option among several possible courses of action.
4. Optimization analysis
This type of managerial economics uses mathematical methods to find the optimal solution to a problem that involves maximizing or minimizing an objective function subject to some constraints. It uses techniques such as linear programming, nonlinear programming, integer programming, dynamic programming, and game theory to solve problems such as resource allocation, production planning, inventory management, pricing strategy, bidding strategy, and strategic interaction.
5. Econometric analysis
This type of managerial economics uses statistical methods to estimate and test economic relationships based on empirical data. It uses tools such as regression analysis, correlation analysis, hypothesis testing, confidence intervals, t-tests, ANOVA, chi-square tests, and time series analysis to measure the impact of various factors on a dependent variable of interest.
6. Forecasting analysis
This type of managerial economics uses historical data and trends to predict future values of a variable or a series of variables. It uses methods such as trend analysis, moving averages, exponential smoothing, ARIMA models, and regression models to forecast demand, sales, revenue, costs, profits, and other key indicators.
7. Policy analysis
This type of managerial economics evaluates the effects and implications of various policies and regulations on the business environment and performance. It uses tools such as cost-benefit analysis, cost-effectiveness analysis, social welfare function, externalities, public goods, market failure, and government failure to assess the efficiency, equity, and feasibility of different policy options.
Managerial economics is a useful discipline that helps managers to make better decisions in a complex and uncertain world. By knowing the different types of managerial economics, you can apply the appropriate concepts, tools, and techniques to analyze any business problem or opportunity.
Types of Managerial Economics and Their Impact on Global Demand
Managerial economics is a branch of economics that applies economic theories and methods to the decision-making process of organizations. It helps managers to optimize profits, allocate resources, and cope with uncertainty. There are different types of managerial economics, depending on the focus and approach of the managers. Here are some of them:
Liberal Managerialism: This type of managerial economics emphasizes the role of the market as a democratic space where customers make their choices and preferences. Managers must follow the market trends and customer demands, otherwise they risk losing their competitive edge. Liberal managerialism can increase global demand by offering products and services that meet the needs and wants of diverse customers across the world.
Normative Managerialism: This type of managerial economics focuses on the ethical and social aspects of business decisions. Managers must consider the impact of their actions on the stakeholders, such as employees, customers, suppliers, society, and environment. Normative managerialism can increase global demand by enhancing the reputation and social responsibility of the organization, as well as creating value for the society.
Analytical Managerialism: This type of managerial economics relies on data analysis and quantitative methods to solve business problems. Managers use tools such as operations research, mathematical programming, game theory, and other computational methods to optimize decision making under uncertainty. Analytical managerialism can increase global demand by improving efficiency, productivity, quality, and innovation of the organization.
References:
https://www.nber.org/system/files/working_papers/w13653/w13653.pdf
https://www.shsu.edu/~eco_dgf/web_chapter_a.pdf
https://www.shsu.edu/~eco_dgf/web_chapter_a.pdf
https://cet.econ.northwestern.edu/dekel/pdf/role-of-common-knowledge-assumptions-in-game-theory.pdf
http://www.mim.ac.mw/books/Mankiw%27s%20Principles%20of%20Microeconomics%202nd%20ed.pdf
https://en.wikipedia.org/wiki/Managerial_economics
https://www.analyticssteps.com/blogs/what-managerial-economics-definition-types-nature-principles-scope
https://www.cheggindia.com/career-guidance/managerial-economics-principals-types-and-scope/
