Managerial economics

Managerial economics is a branch of economics that applies economic methods and microeconomic analysis to decision-making inside organizations. It uses economic theories and principles to guide how managers allocate scarce resources, and it informs decisions about a company's customers, competitors, suppliers and internal operations. Managers use these frameworks to optimize profits, resource allocation and output while improving efficiency. Its two main purposes are to improve decision making when a firm faces problems and to analyze the likely effects of short and long term planning decisions on revenue and profitability. The field draws on operations research, mathematical programming, game theory and quantitative techniques such as regression analysis, correlation and calculus. Its subject matter includes incentives, business organization, biases, advertising, innovation, uncertainty, pricing, analytics and competition, and it rests mainly on microeconomic ideas such as supply and demand, production theory, opportunity cost and price theory. It is sometimes called business economics, and acts as a link between management practice and economic theory. Typical questions include what price and quantity a business should produce and when to purchase or retire equipment.