IGCSE Economics Paper-2: Specimen Questions with Answers 22 - 23 of 100

Passage

Managerial Economics deals with practical business-problems relating to production, pricing, and sales.

Question 22 (1 of 5 Based on Passage)

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Short Answer▾

State the role of managerial economics in decision making.

Explanation

The role of managerial economics is as follows:

  • Managerial economics is an evolutionary science; it is a journey with continuing understanding and application of economic knowledge- theories, models, concepts, and categories emerging in business.
  • Decision making is the curricular aspect of dealing with business problems. Decision becomes essential since business problem would usually imply basic question: What is the alternative course of action?
  • For making an optimum economic choice as an aid to better decision making. It provides an understanding of the framework and economic tools needed by managers/businessman in business decision making.
  • It seeks to establish rules and principles to facilitate the attainment of desired economic goals of management.
The Basic Business Problems

Question 23 (2 of 5 Based on Passage)

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Show the relationship between economic problem and decision making.

Explanation

Managerial Economics Deals with Practical Business

  • problems relating to production, pricing, and sale. These problems are theoretically, analyzed by traditional economics.
  • Decision making is an art as well as science. Many managerial decisions are addressed in a routine manner. Rules of thumb or the tried and true decisions rules are, however invalidated by the changes in routine situations. Dynamic changes in business situations need that decision is to be addressed in proactive manner. In proactive decision making many alternatives must be explored; conditions and assumptions must review and structured in a perspective manner. Managerial economics helps in understanding of business and various economic aspects, economic jargons, tools, techniques, and tactics that will help the manager in the overall development as a great decision maker. He addresses the different dynamic situations in business that is critical and comprehensive.
  • In modern business it is the management which is crucial in determining the success of the business. Business prospers only when management is sound and pragmatic. Modern business involves huge investment and undertakes big risk.

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