Table of Contents
Managerial Economics: Bridging the gap between economic theory and business practice
Introduction 3
Definition 3
Economic Theory Vs. Managerial Theory 4
Decision-making 6
Scope of Managerial Economics 6
Positive versus Normative Economics 7 Positive Economics 7 Normative Economics 7
Examples Demonstrating How Managerial Economics Translates Economic Theory into Business Practice 9 Demand Analysis and Forecasting 9 Cost and Production Analysis 10 Inventory Management 10 Advertising 11 Pricing Decision, Policies and Practices 11 Profit Management 11 Capital Management 12
Responsibilities of a Managerial Economist 13
Conclusion 15
Gadgets International: A Case Study
Nature of the Case Study 16
About Gadgets International (GI) 16
Market/Industry Structure 17
Firm’s Objectives 19
Using Economic Theory to Attain Gadgets International’s Organizational Goals & Objectives 19 Optimal Output Level & Pricing Strategy 19 Inputs and Costs 22 Accommodating Change 24 Promoting Growth 25
Conclusion 26

Managerial Economics
Bridging the gap between economic theory and business practice
Introduction
The science of Managerial Economics has emerged only recently. With the growing variability and unpredictability of the business environment, business managers have become increasingly concerned with finding rational and ways of adjusting to an exploiting environmental change. Managerial economics generally refers to the integration of economic theory with business practice. Economics provides tools managerial economics applies these tools to the management of business. In simple terms, managerial economics means the application of economic theory to the problem of management. Managerial economics may be viewed as economics applied to problem solving at the level of the firm. It enables the business executive to