Profit Maximization Theory of the Firm
Profit maximization theory of firm

Profit Maximization Theory of the Firm

Profit maximization is one of the most important assumptions of economic theory. In economics, it is always assumed that a firm’s rationality is the maximization of profit. It means, rational producer or entrepreneur always attempts for profit maximization. Thus profit maximization constitutes a central and crucial concept in the theory of the firm.

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Relationship between Economic and Business Profit
Relationship between Economic and Business Profit

Relationship between Economic and Business Profit

The term profit in economics differs from that generally used by the business community. A business profit is an accounting profit or accounting concept of profit and presents the residual sales revenue to the owners of the business firms after making payments to all purchased factors or resources used by the firm belonging to other persons.

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Functions of Profit in Managerial Economics
Functions of Profit in managerial economics

Functions of Profit in Managerial Economics

The business organization produces goods not for the charity rather for generating profits. In a dynamic and free-market economy, profit is only the major stimulating factor for new innovation and new products. The rate of profit in the economy gives a signal to producers to change their rate of output or to leave or to join the industry.

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Role of Managerial Economics in the Business Decision-Making Process
Role of managerial economics in the business decision-making process, use of managerial economics for a manager, significance of managerial economics in business decisions

Role of Managerial Economics in the Business Decision-Making Process

Managerial economics combines economic theories with decision science tools and as it is metrical and analytical it assists the managers to solve the complexity existed in the business. Managerial economics through its skills and techniques always ensure the solution to business decision-making problems that may be faced by every type of business organization. Managerial economics plays a key role in the business decision-making process.

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Relationship between Managerial and Traditional Economics
Relationship between Managerial and Traditional Economics, how managerial economics is linked with traditional economics

Relationship between Managerial and Traditional Economics

Managerial economics is developed from micro economic theories by taking those concepts and techniques that help managers to select strategic decisions/direction, efficiently allocate the available resources, and to respond effectively to strategic issues. Therefore, it is an application of economic theory into business practice/management.

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Concept and Features of Managerial Economics
Concept and Features of Managerial Economics

Concept and Features of Managerial Economics

Business economics/managerial economics is the application of economics in the field of business management. It means it is the use of economic theory and methods to decision-making problems that a firm may have to face. Managerial economics has been a separate science from traditional economics since the 1950s. After such, economists treat managerial economics as a young and growing science.

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