Let us make an in-depth study to know whether managerial economics is a science or an art or both.
Managerial Economics as a Science:
If we will study Managerial Economics as a science, we can come to this conclusion that it establishes a relationship between cause and effect by collecting, classifying and analysing the facts on the basis of certain principles.
It co-ordinates production and distribution by analysing the internal and external factors concerning the firm. Such analysis is based on certain principles of economics. Accounting and statistics helps in bringing down the cost of production.
Science is normally divided into two parts:
(i) Positive, and
Positive science relates to the aspect which provides answer to the question:
(a) What a particular aspect is?
(b) Particular aspect ought to be?
In this way, Managerial Economics may be characterised as positive as well as normative science. It provides not only the scientific analysis of the problem but finds out its practical solution also by classifying and analysing the present and foreseeable situations.
Managerial Economics as an Art:
Managerial Economics as an art offers the mode of dicing a particular thing. It tries to provide a clue to the ‘how’ part of the problem or in other words it suggests how a particular problem should be solved. It points out to the objectives and also shows the way to attain the said objectives.
Managerial Economics thus tries to find out solutions to various problems. In the process of decision-making the management tries to choose out the action out of various alternatives available in order to achieve the organisational goal, i.e., “Maximisation of profits at minimum of costs.” Thus, Managerial Economics is a Science as well as an Art.
It is an Applied Branch of Economics:
Various economic principles and theories are applied towards solving the economic problems. For example—Demand analysis, cost analysis, profits analysis are used in solving business problems.
It is more Concerned with Decision-Making:
To make the best under a given situation-all decisions relating to subjects covered by Managerial Economics are concerned with the improvement inefficiency of the business, e.g., how to reduce costs or maximum profits. By nature, the task of decision-making is more of micro character because in managerial economics, decisions are taken only in respect of the economic problems of a particular firm.
It is also important in this regard that Micro decisions are taken under Macro economic conditions, e.g., by considering the conditions prevalent in the country.