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Role of a Managerial Economist
Making decisions and processing information are
the two primary tasks of managers.
•In order to make intelligent decisions, managers
must be able to obtain, process and use
•The purpose of learning economic theory is to
help managers know what information should be
obtained and how to process and use the
• The task of organizing and processing
information and then making an intelligent
decision based upon this information and the
basic theory can take two general forms:
• 1. Task of making specific decisions by
• General task of managers to use readily
available information to make a decision or
carryout a course of action that Furthers the
goals of the organization.
• Specific decisions:
• there are several decisions that managers might
have to take.
• Ex: whether or not to close down a branch of firm
that has recently been unprofitable.
• Whether or not a store should stay open more
hours a day.
• Whether to pay for outside computing or copying
services rather than install an in house computer
• After conducting a survey of British industry
Alexander and kemp came to the conclusion
that the managerial economist undertakes the
following specific functions:
• Production scheduling.
• Demand forecasting.
• Market research
• Economic analysis of industry.
• Investment appraisal,
• Security management analysis
• Advice on foreign exchange management.
• Advice on trade.
• Pricing and the related decisions and analyzing
and forecasting environmental factors.
• All of these and a myriad of other managerial
decisions require the use of the basic
• General tasks :
• Economic theory helps decision-makers to
know what information is necessary to make
an intelligent decision to fine the correct
solution to a problem and to learn how to
process and use that information.
• After obtaining the desired information or as
much information as is economically feasible
to obtain, the manager must analyze this
information and use it in correspondence with
the theoretical and statistical tools available to
make the best decision possible under the
• We find that business is influence by two sets of
• External factors
• Internal factors.
• External factors:
• the most important external factor is
• The general economic condition of the economy,
such as the level and rate of growth of national
income, regional income distribution, influence of
international factors on the domestic economy,
the business cycle etc.
• The managerial economist must obtain and
process information with regard to these
changes, advise the management regarding
their likely effects on the operations of the
firm and suggest possible ways to further the
• The second important external factor for a
firm is the prospects of demand for the
• Thirdly the managerial economist also tries to
find out if there is anything which is
influencing the input cost of the firm.
• Fourthly the market conditions of raw
material and finished product is also a subject
of study by the managerial economist.
• Next managerial economist can also help in
the expansion of the firm’s share in the
• Lastly managerial economist has also to keep
in touch with the government’s economic
policies and the central bank’s monetary
policies, annual budgets of the government,
• The role of managerial economist in internal
• He helps in deciding about the production,
sales and inventory schedules of the firm.
• He not only provides information regarding
their present level but also forecasts their
• A managerial economist is used best to
provide the pricing and profit policies.
• The firm also needs the help of managerial
economist for its investment decisions.
• For this he need to forecast the return on the
investment and the cost that the firm incurs
by taking up the investment.