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Scope of Managerial Economics: Well scope is something which tells us how far a particular subject will go. As faras Managerial Economic is concerned it is very wide in scope. It takes intoac count almost all the problems and areas of manager and the firm.ME deals with De mand analysis, Forecasting, Production function, Cost analysis,Inventory Managem ent, Advertising, Pricing System, Resource allocation etc.Following aspects are to be taken into account while knowing the scope of ME: 1. Demand
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  ScopeofManagerialEconomics:Wellscopeissomethingwhichtellsushowfaraparticularsubjectwillgo.AsfarasManagerialEconomicisconcerneditisverywideinscope.Ittakesintoaccountalmostalltheproblemsandareasofmanagerandthefirm.MEdealswithDemandanalysis,Forecasting,Productionfunction,Costanalysis,InventoryManagement,Advertising,PricingSystem,Resourceallocationetc.FollowingaspectsaretobetakenintoaccountwhileknowingthescopeofME:1.Demandanalysisandforecasting:Unlessanduntilknowingthedemandforaproducthowcanwethinkofproducingthatproduct.Thereforedemandanalysisissomethingwhichisnecessaryfortheproductionfunctiontohappen.Demandanalysishelpsinanalyzingthevarioustypesofdemandwhichenablesthemanagertoarriveatreasonableestimatesofdemandforproductofhiscompany.Managersnotonlyassessthecurrentdemandbuthehastotakeintoaccountthefuturedemandalso.2.Productionfunction:Conversionofinputsintooutputsisknownasproductionfunction.Withlimitedresourceswehavetomakethealternativeusesofthislimitedresource.Factorofproductioncalledasinputsiscombinedinaparticularwaytogetthemaximumoutput.Whenthepriceofinputrisesthefirmisforcedtoworkoutacombinationofinputstoensuretheleastcostcombination.3.Costanalysis:Costanalysisishelpfulinunderstandingthecostofaparticularproduct.Ittakesintoaccountallthecostsincurredwhileproducingaparticularproduct.Undercostanalysiswewilltakeintoaccountdeterminantsofcosts,methodofestimatingcosts,therelationshipbetweencostandoutput,theforecastofthecost,profit,thesetermsareveryvitaltoanyfirmorbusiness.4.InventoryManagement:Whatdoyoumeanbytheterminventory?Welltheactualmeaningoftheterminventoryisstock.Itreferstostockofrawmaterialswhichafirmkeeps.Nowherethequestionariseshowmuchoftheinventoryisidealstock.Boththehighinventoryandlowinventoryisnotgoodforthefirm.ManagerialeconomicswillusesuchmethodsasABCAnalysis,simplesimulationexercises,andsomemathematicalmodels,tominimizeinventorycost.Italsohelpsininventorycontrolling.5.Advertising:Advertisingisapromotionalactivity.Inadvertisingwhilethecopy,illustrations,etc.,aretheresponsibilityofthosewhogetitreadyforthepress,theproblemofcost,themethodsofdeterminingthetotaladvertisementcostsandbudget,themeasuringoftheeconomiceffectsofadvertising----aretheproblemsofthemanager.There  savastdifferencebetweenproducingaproductandmarketingit.Itisthroughadvertisingonlythatthemessageabouttheproductshouldreachtheconsumerbeforehethinkstobuyit.Advertisingformstheintegralpartofdecisionmakingandforwardplanning.6.Pricingsystem:Herepricingreferstothepricingofaproduct.Asyouallknowthatpricingsystemasaconceptwasdevelopedbyeconomicsanditiswidelyusedinmanagerialeconomics.Pricingisalsooneofthecentralfunctionsofanenterprise.Whilepricingcommoditythecostofproductionhastobetakenintoaccount,butacompleteknowledgeofthepricesystemisquiteessentialtodeterminetheprice.Itisalsoimportanttounderstandhowproducthastobepricedunderdifferentkindsofcompetition,fordifferentmarkets.Pricing=costpluspricingandthepoliciesoftheenterpriseNowitisclearthatthepricesystemtouchestheseveralaspectsofmanagerialeconomicsandhelpsmanagerstotakevalidandprofitabledecisions.7.Resourceallocation:Resourcesareallocatedaccordingtotheneedsonlytoachievethelevelofoptimization.Asweallknowthatwehavescarceresources,andunlimitedneeds.Wehavetomakethealternateuseoftheavailableresources.Fortheallocationoftheresourcesvariousadvancedtoolssuchaslinearprogrammingareusedtoarrivea  tthebestcourseofaction.
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