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15 Examples of Managerial Economics

 , updated on January 19, 2019
Managerial economics is the use of economic models and theories to guide business strategy, decisions and problem solving. The following are illustrative examples.


The use of supply and demand models to set prices. Pricing strategy may also be based on a wide range of economic theories such as the idea of a price signal, sticky price or price umbrella.

Business Model

Business models are the ways that a firm creates and captures value. This is always based on economics such as a theme park that is an example of club theory or a social media company that derives value from the network effect.

Capital Investment

Economics is key to the timing and sizing of capital investment. For example, an understanding of the business cycle is required to time investments in new capacity.


Using supply and demand forecasts to plan operations such as production.


Planning distribution elements such as warehouses, retail locations and product showrooms based on economies of density.


Seeking to defy the tendency for all goods to be quickly commoditized by finding ways to improve quality beyond the commodity level to command a premium price.


Modeling promotional efforts with attention economics. For example, calculating the payback for digital advertising that produces improvements in brand recognition.


Modeling risk using economics such as an insurance company that factors in adverse selection in their risk estimates.

Customer Needs

Formulating and estimating customer needs based on factors such as diminishing marginal utility.

Customer Experience

Customer experience related strategy such as using economies of scope to offer customers greater convenience.


Recognizing the power of technology to change economics resulting in opportunity and risk in markets. For example, cloud computing turned computers into a utility service. This drove down prices and created opportunities for a vast number of firms who could suddenly command large computing resources on demand at a relatively low cost.


Calculating the efficiency of your operations and products as a basic form of management accounting and optimization.


Measuring the productivity of workers, including knowledge workers, and finding ways to boost productivity such as investment in tools and automation.


Developing competitive advantages using foundational economics such as barriers to entry.

Small Business

Small businesses and startups also commonly use managerial economics. For example, a small business that seeks to avoid the market power of larger firms by creating niche products and services that do not compete directly with greater economies of scale. Small businesses may also seek to benefit from diseconomies of scale such as a large competitor that is slow to change.
Overview: Managerial Economics
DefinitionThe use of economic models and theories to guide business strategy, decisions, optimization and problem solving.
Related Concepts


This is the complete list of articles we have written about economics.
Added Value
Advanced Economy
Adverse Selection
Animal Spirits
Attention Economics
Bargaining Power
Barriers To Entry
Behavioral Economics
Behavioral Finance
Bounded Growth
Bounded Rationality
Business Cluster
Business Value
Capital Flight
Capital Goods
Circular Economy
Club Theory
Comparative Advantage
Competitive Parity
Cost Competition
Critical Mass
Customary Pricing
Deadweight Loss
Division Of Labor
Economic Activity
Economic Advantage
Economic Bad
Economic Conditions
Economic Context
Economic Development
Economic Growth
Economic Infrastructure
Economic Problems
Economic Sector
Economic Systems
Economic Theories
Economies Of Density
Economies Of Scale
Experience Economy
Extreme Value Theory
Factors Of Production
Failure Demand
Fiscal Dominance
Free Market
Gains From Trade
Giffen Good
Income Distribution
Industrial Complex
Industrial Economy
Inferior Good
Information Asymmetry
Intangible Goods
Intangible Value
Knowledge Economy
Labor Productivity
Long Tail
Marginal Utility
Market Conditions
Market Economy
Market Failure
Market Forces
Market Power
Marketing Economics
Mean Regression
Media Economics
Merit Good
Middle Class
Monetary Policy
Plateau Effect
Predatory Pricing
Price Economics
Price Umbrella
Price War
Pricing Strategy
Profit Motive
Rational Choice Theory
Rent Seeking
Rule Of Three
Search Good
Service Economy
State Capitalism
Sticky Prices
Superior Goods
Supply Shock
Sustainable Economics
Switching Barriers
Threat Of Substitutes
Trade War
Traditional Economy
Unsought Goods
Value Creation
Veblen Goods
Zero-sum Game
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