Managerial economics, meaning the application of economic methods to the managerial decision-making process, is a fundamental part of any business or management course. It has been receiving more attention in business as managers become more aware of its potential as an aid to decision-making, and this potential is increasing all the time. This is happening for several reasons:
It is becoming more important for managers to make good decisions and to justify them, as their accountability either to senior management or to shareholders increases.
As the number and size of multinationals increases, the costs and benefits at stake in the decision-making process are also increasing.
In the age of plentiful data it is more imperative to use quantitative and rationally based methods, rather than ‘intuition’.
The pace of technological development is increasing with the impact of the ‘new economy’. Although the exact nature of this impact is controversial, there is no doubt that there is an increased need for economic analysis because of the greater uncertainty and the need to evaluate it.
Improved technology has also made it possible to develop more sophisticated methods of data analysis involving statistical techniques. Modern computers are adept at ‘number-crunching’, and this is a considerable aid to decision-making that was not available to most firms until recent years.
As managerial economics has increased in importance, so books on the subject have proliferated. Many of the more recent ones claim like this one to take a problem-solving approach.