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Managerial Economics has been described as economics applied to decision- . Describe the basic economic tools in managerial economics. (Nov/Dec 2013) d
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Managerial economics is a stream of management studies which emphasises solving business problems and decision-making by applying the theories and principles of microeconomics and macroeconomics. It is a specialised stream dealing with the organisation's internal issues by using various economic theories.
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From Managerial Economics
Features of perfect competition (any five):
Hence individual firms cannot influence market price.
A general demand function can be written as: Qd = f(P, Y, Ps, Pc, T, A, E, N).
Where P = price of the good, Y = income, Ps = price of substitutes, Pc = price of complements, T = tastes/preferences, A = advertising, E = expectations, N = number of buyers.
This shows demand depends on multiple factors, not only price.
A decision tree is a diagram showing decisions and chance events in sequence.
Square (Decision) → Circle (Chance) → Payoffs
← Rollback (compute EV backward)
Sensitivity analysis tests how results change when one variable changes.
Managers focus on variables with the biggest impact (key risk drivers).