INTRODUCTION Emergence of managerial economics as a separate curse of management studies can be attributed to at least three factors a) Growing complexity

of business decision making process due to changing market conditions and business environment b) The increasing use of economic logic, conceptual theories and tools of economic analysis in the process of business decision making process c) Rapid increase in demand for professionally trained managerial manpower DFINITIONS OF ECONOMICS AND MANAGERIAL ECONOMICS ECONOMICS: Economics is a social science . Its basic function is to study how people individual house holds, firms and nations maximizing their gains from their limited resources and opportunities. In economic terminology it is called as maximizing behaviour or more approximately optimizing behavior . Optimization means selecting best out of available resources with the objective of maximizing gains from given resources. The origin of the subject could be traced from the works of the Greek philosopher Aristotle who confined the study of economics to household management and acquiring, guarding and making proper use of wealth. The term economics is derived from two Greek words OIKOS (a house) and NEMEIN (to manage). Prof. Samuleson remarks economics as the oldest of arts and newest of science, indeed the queen of the social science. Managerial Economics Managerial economics can be broadly defined as the study of economic theories, logic and tools of economic analysis that are used in the process of decision making. Economic theories and techniques of economic analysis are applied to analyze business problems, evaluate business options and opportunities with a view to arriving at an appropriate business decision. Douglas : Managerial economics is concerned with the application of economic principles and methodologies to the decision making process within the firm or organization. It seeks to establish rules and principles to facilitate the attainment of the desired economic goals of the management.

Mansfield : He defines that managerial economics is concerned with the application of economic concepts and economic tools to the problems of formulating rational decision making.

Spencer and Seigleman : It is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management

Nature /characteristics of managerial Economics

1. Micro-economic in character: - managerial economics is micro economics in character as it is concerned with smaller units of the economy. It studies the problems and principles of management in an individual business firm or an individual industry. 2. Normative science: - managerial economics is a normative science . it tells us what should be done under given circumstances. It is concerned with what should be done to achieve the organization goals most efficiently. It explains what the firm should do in order to get good results. 3. Pragmatic: - in pure micro economic theory analysis is carried on the basis of certain assumptions which are for from reality but M.E avoids difficult issues of economic theory and tackles practical problems faced by the firm in their normal functioning. 4. Takes the help of macro economics: - M.E takes the help of Macro economics also because it needs an understanding of the circumstances and environment in which an individual firm or an industry has to work. 5. Conceptual it is both conceptual and metrical .It takes the help of conceptual framework to understand and analyse the decision problems and takes the help of quantitative techniques to measure the impact of different factors and policies. 6. Uses theory of the firm: - The contents of M.E are based mainly on the theory of Firm. It is only for the analysis of profits that help is taken of the theory of distribution 7. Helping the management: - Managerial economics is immediately useful .it aims at helping the management in taking correct decisions and preparing plans and policies for the future. In contrast economic theory is relatively abstract.