Contributions of economic theory to business economics, Managerial Economics

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Contributions of economic theory to business economics

According to Baumol, there are 3 key contributions of economic theory to business economics.

1.  Practice of building analytical models that help in recognising the structure of managerial problems and eliminating minor details which may obstruct decision-making has been derived from economic theory. Analytical models assist in eradicating peripheral problems and assist the management in retaining focus on core issues.

2.  Economic theory comprises a founding pillar of business analysis- 'a set of analytical methods' thatmay not be applied directly to specific business problems however they do improve the analytical capabilities of business analyst. 

3.  Economic theories provide an unequivocal perspective on several concepts used in business analysis, thatenables the manager to swerve from conceptual pitfalls.

 


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