Role of a Managerial Economist in business

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 information.•The purpose of learning economic theory is to help managers know what information should be obtained and how to process and use the information.

• 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 managers

• 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 or copier.

• 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 economics.

• 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 circumstances.

• We find that business is influence by two sets of decision factors:

• 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 organization’s goals.

• The second important external factor for a firm is the prospects of demand for the product.

• 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 market.

• 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, etc.

Internal factors:

• The role of managerial economist in internal management is:

• 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 future trend.

• 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.