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ISSN: 2169-0286

Journal of Hotel & Business Management

Managerial Economics
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Managerial economics is the science of directing scarce resources to manage cost effectively. It consists of three branches; competitive markets, market power, and imperfect markets. A market consists of buyers and sellers that communicate with each other for voluntary exchange. Whether a market is local or global, the same managerial economics apply. A seller with market power will have freedom to choose suppliers, set prices, and use advertising to influence demand. A market is imperfect when one party directly conveys a benefit or cost to others, or when one party has better information than others. An organization must decide its vertical and horizontal boundaries. For effective management, it is important to distinguish marginal from average values and stocks from flows. Managerial economics applies models that are necessarily less than completely realistic. Typically, a model focuses on one issue, holding other things equal.

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