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The development of managerial economics is attributed to the close relationship that exists between management and economics (Brickley, Smith, & Zimmerman, 2015). For example, management requires a great deal of economic analysis in the carrying out of evaluations aimed at establishing the demand, cost, competition, and profit associated with certain goods and/or services (Brickley et al., 2015). On the other hand, management plays a significant role in guaranteeing that all challenges that may arise particularly in the handling of employees are adequately addressed (Brickley et al., 2015). Thus, the combination of these two aspects of business results in managerial economics, which comprises of managerial theories and economic theories aimed at guaranteeing the development of a sustainable business environment (Brickley et al., 2015). The concept behind managerial economics is best elaborated by Spencer and Siegelman, who defined it as “the integration of economic theory with business practice for the purpose of facilitating decision making and planning by management.” (Brickley et al., 2015).

Managerial economics meets its objectives by integrating diverse economic aspects such as microeconomics and macroeconomics. Microeconomic is designed around studying the actions firms and individual consumers with the aim of understanding what influences certain business patterns at the regional level (Brickley et al., 2015). Macroeconomics is centered on analyzing the structure, performance, and the behavior of the economy as a whole (Brickley et al., 2015). While managerial economics incorporates the use of microeconomics in the implementation of certain theories and techniques aimed at improving management decisions, it is important to note that the scope of microeconomics is limited compared to macroeconomics (Brickley et al., 2015). On the other hand, macroeconomics analyzes aggregate indicators such as the unemployment rate and the GDP to have a vast understanding of the factors that are influencing the general economy (Brickley et al., 2015).

The incorporation of microeconomics in managerial economics is influenced by the fact that they both advocate the need to utilize quantitative methods in evaluating economic data. By utilizing quantitative analyzing methods, it becomes possible to warrant that the human and financial resources required to effectively manage a particular business are allocated efficiently (Froeb, McCann, & Ward, 2015). On the other hand, the use of macroeconomics in managerial economics is based on the impact it has in providing a wider scope on the overall condition of the economy. The information acquired using macroeconomics is what governments utilize in the establishment of policies aimed at enhancing an economy (Froeb et al., 2015).

Even though managerial economics is comprised of numerous functions, it is primary function is effective decision-making. This is attained by taking courses of actions that warrant that every challenge is addressed using the most suitable option derived from two or more alternatives (Froeb et al., 2015). The need to take the best course of action is influenced by the fact that in spite of the numerous roles an organization plays, its responsibility to its shareholders is that the available resources are utilized in the best way post to warrant profitability (Froeb et al., 2015). While the use of microeconomics and macroeconomics have been noted to have a critical role in shaping the role of managerial economics, it is important to note that it is a continuous process since it has not met its maximum potential (Froeb et al., 2015). In addition to micro and macroeconomics, capital management, profit management, and demand analysis and forecasting are also considered to be covered under the scope of managerial economics (Froeb et al., 2015). Based on the evaluation provided, it is inevitable to note the significant role managerial economics has in warranting managerial challenges are handled in the manner possible using diverse economic concepts and decision science techniques.

References Brickley, J., Smith, C., & Zimmerman, J. (2015). Managerial economics and organizational architecture. New York, New York: McGraw-Hill Education. Froeb, L. M., McCann, B. T., & Ward, M. R. (2015). Managerial economics. Boston, Massachusetts: Cengage learning.