Managerial economics is a stream of management studies which emphasizes solving business problems

and decision-making by applying the theories and principles of microeconomics and macroeconomics. It
is a specialized stream dealing with the organization’s internal issues by using various economic
theories. Economics is an inevitable part of any business. All the business assumptions, forecasting and
investments are based on this one single concept. Micro economics means that managerial economics
used to find the solution of different problems within the organization and macro economics this is
against micro economics example inflation, industrial policies this is out of organization. The science of
managerial economics is emerged recently due to growing, changeability and unpredictability of the
firm's business environment. And also due managerial economics managers can able to sit down and
making decisions for the firm aspects like allocation of resources production cost analysis, pricing
competition strategies, capital or investment analysis The Production Possibility Frontier

According to D.N.Dwivedi from the book of Microeconomics, Theory and Application of PPF as follows;
Production possibility frontier is the graph which indicates the various production possibilities of two
commodities when resources are fixed. The production of one commodity can only be increased by
sacrificing the production of the other commodity. It is also called the product transformation curve.
Example The state of technology is taken to be constant. Since the production of one commodity can be
increased only by decreasing the production of the other commodity, production possibility curve also
measures the production efficiency of the commodities. The production possibility frontier helps in
deciding the commodities most beneficial to society, but this response is limited in itself as there is a
choice between two commodities only.

For instance, producing five units of wine and five units of cotton (point B) is just as desirable as
producing three units of wine and seven units of cotton. Point X represents an inefficient use of
resources, while point Y represents a goal that the economy simply cannot attain with its present
levels of resources.
As we can see, in order for this economy to produce more wine, it must give up some of the
resources it is currently using to produce cotton (point A). If the economy starts producing more
cotton (represented by points B and C), it would need to divert resources from making wine and,
consequently, it will produce less wine than it is producing at point A.
Moreover, by moving production from point A to B, the economy must decrease wine
production by a small amount in comparison to the increase in cotton output. But if the economy
moves from point B to C, wine output will be significantly reduced while the increase in cotton
will be quite small.
Keep in mind that A, B, and C all represent the most efficient allocation of resources for the
economy. The nation must decide how to archieve the PPF and which combination to use. If
more wine is in demand, the cost of increasing its output is proportional to the cost of decreasing
cotton production. Markets play an important role in telling the economy what the PPF ought to
look like.
Consider point X on the figure above. Being at point X means that the country's resources are not
being used efficiently or, more specifically, that the country is not producing enough cotton or
wine given the potential of its resources. On the other hand, point Y, as we mentioned above,
represents an output level that is currently unattainable by this economy.
If there were an improvement in technology while the level of land, labor, and capital remained
the same, the time required to pick cotton and grapes would be reduced.
Output would increase, and the PPF would be pushed outwards. A new curve, represented in the
figure below on which Y would fall, would show the new efficient allocation of resources.

When the PPF shifts outwards, it implies growth in an economy. When it shifts inwards, it
indicates that the economy is shrinking due to a failure in its allocation of resources and optimal
production capability.
The following are the reason for the PPF to be bounded outward,
Discovery of new sources of raw materials,
In this discovery of new source of raw materials is to increase input so as to increase caacity of
production and increasing output of an organisation. A good example cotton on clothes
manufacturing industries when they increase and discover new raw materials enable an industries
to increase production and due to this we can say PPF curve will bounded outward since the
output increased.
The importation of raw materials from another country,
When there is an increase of the resources from another countries to be used in production this
lead to increase the amount of output produced. The PPF helps to show all different attainable
combination of the production of two commoditties that can be produced by the firm with the
given resources and technology which are to be fully utilized. So under this situation can lead to
production possibility frontier to be bounded outward.
Improvement of technology,
In improvement of technology increase on investment and also increase potential of output
produced. Since production in new technology is more efficiently and getting high output than
old technology because they use a lot of time in producing small output since there is new
technology help to produce highly yield. A good example is mechanisation during 18th and 19th
century production was growing rapidly. So due to this lead to PPF shift or bounded outward.
Supply and demand,
Supply and demand are microeconomic concept that states that in efficient market ,the quantity
supplied of goods and quantity demanded of that good are equal to each other. The price of that
good is also determined by the point at which supply and demand are equal to each other.
Imrovement of education and training,
This helps on division of labour and tasks deending on their specialization and hence increase
production of output due to separate tasks and enabling machines to be developed and help
production. Allowing labour to specialise on small range of activities. A division of labour
considerably to improve productive capacity and shift or bounded the PPF outward.
The following are the impication on the relationship between opportunity cost and quantity
produced,
The production possibility frontier (PPF) is determined by its slope, or rather, the opportunity
cost and the quantity produced. The opportunity cost determines the proportion of quantity
produced that is given off by a manufacturer to increase the production of another quantity
produce. With the increasing manufacturing scale, the producer is willing to trade-off a higher
amount of another object. This leads to a concave shape of PPF (outward bending).
Opportunity cost can be thought of in terms of how decisions to increase the production of an
extra, marginal, unit of one good leads to a decrease in the production of another good.
According to economic theory, successive increases in the production of one good will lead to an
increasing sacrifice in terms of a reduction in the other good. For example, as an economy tries
to increase the production of good X , such as cameras, it must sacrifice more of the other good,
Y, such as mobile phones.
Generally, Menegerial economics is the firm decision making process also Menegerial economy
can be used by menegers to allocate the scarcity resources inorder to reach an organization
objectives. Also Menegerial economic can help to solve microeconomics problems, also help to
know how and what should be done with organisation, can help to find possible solution to reach
the organization goals and lastly Menegerial economic can be applied in certain problems
inorder to make a decision.

References
Alan Hughes (1987). "managerial capitalism," The New Palgrave: A Dictionary of Economics,
v. 3, pp. 293–96.
Edward Lazear (2008). "personnel economics," The New Palgrave Dictionary of Economics. 2nd
Edition. Abstract.
Keith Weigelt (2006). Managerial Economics
Elmer G. Wiens The Public Firm with Managerial Incentives
Khan Ahsan (2014). "Managerial Economics and Economic Analysis", 3rd edition, Pakistan.
arya sri."managerial economics " :MEFA . (2015).