Question

Summarize the relationship between managerial economics and business strategy using three examples.

Answer 1

Managerial economics is highly involved in decision making which in turn is the heart of business strategy on the whole and that is the reason why both are highly correlated.

1) consider the problem where you are given the opportunity to increase or decrease the price but to generate revenue and using managerial economics can actually find out the elasticity of the product and according to which if it is greater than 1 you will decrease the price else increase.

2) consider the problem where you have to identify which is the better alternative for actually taking and using opportunity cost analysis in the managerial economics and actually find it out and employ your business strategy.

3) consider you are given a problem of setting the maximum profit price for a product and using managerial economics where using the concept of price is equal to marginal cost in a perfectly competitive market you actually can get to set the price