Introduction to Economics

Economics can be described as a study of production, distribution and consumption of goods and services. Some of the definitions also imply that it is the study that assesses how resources can be used in an efficient manner for production growth in a business. The study, therefore, is going to assess in brief regarding two of the important aspects of economics that is managerial economics and business economics. Both focus on different aspects of economics. The importance of both the economics therefore, will be discussed in the study. Some FAQs will also be illustrated in the study related to the topic.

Managerial economics

It is one of the branches of economics which involves the various economics methods which aid in the managerial decision-making process of a business. This branch of economics is also integrated with economics theory to help in taking effective and right managerial decision-making processes. The major characteristics of managerial economics can be assessed in the following points:

Art and science:

Since managerial economics requires critical thinking for the solution of a particular problem therefore, an economist must have the ability to utilize his capacity, knowledge and skills to achieve the goal of an organization. In this way it acts as an art. On the other hand, it includes economics principles, methods and techniques in its implication; therefore, in that way it acts as science also. 

Microeconomics:

Managerial economics is being considered as a part of microeconomics as it focuses on the problem of any particular business or organization.

Solution based:

This economics is concerned with a solution-based approach. It uses different principles and methods like statistics, math, finance and accounting and human resources therefore, there are high chances that solutions will be almost perfect.

Pragmatic and management based:

Since managerial economics is concerned with goal establishment of a business, decision making and policy information etc. therefore, is a management-based economics.

Types of managerial economics:

Considering the types of managerial economics, there are mainly three types of managerial economics which are “Liberal managerialism”, “Normative managerialism”, and “Radical managerialism”. All these have been briefly described in the following.

Liberal managerialism:

In this type of managerialism, it has been assumed that the market is democratic and free place in terms of decision making and therefore, customers have so many options to choose from and hence businesses need to make changes in their policies as per the demand of consumers, market trends. 

Normative managerialism:

This managerial approach focuses on the fact that decisions taken by administration would be normal and based on real life practices and experiences. It is more related to the design of a product or analysis of its demand and supply and other factors related to growth of business. 

Radical managerialism:

This approach of managerial economics is more concerned with when an approach for a problem fails; therefore, it requires extraordinary skills and thinking like an out of the box approach. As part of radical managerialism, satisfaction of customers is prioritized over profit of the organization. 

Business economics

This branch of economics is concerned with financial organization where market related and environmental issues are stressed which are frequently faced by corporations. This economics focuses on different factors that impact a business very much. The characteristics of business economics are very similar to that of managerial economics therefore these can be seen in the below points:

Microeconomics:

Like managerial economics, this is also a part of microeconomics as it also stresses on the problems of a single business unit.

Normative science:

It is concerned with what business must do in a particular business circumstance and set objectives of business and also find out ways to achieve them. 

Prescriptive: 

This type of economics is more prescriptive rather than descriptive. 

Difference between “economics” and “business economics”

The major differences between economics and managerial economics can be seen in below table.

Table 1: Difference table

(Source: self-created)

Conclusion

The study has been based on brief research on economics and its different approaches. The study therefore, stressed on two economics approaches that are managerial economics and business economics. Considering managerial economics, it has been discussed that it helps in the decision-making process of a business. On the other hand, business economics helps a business in solving problems of different issues such as environment issues and product and service-related issues etc. characteristics of both economics has been illustrated in brief detail. Some FAQs has also been answered in the study.