Managerial Economics and Statistics
Statistics is important to managerial economics in several ways. Managerial economics calls for the organising quantitative data and deriving a useful measure of appropriate functional relationships involved in decision-making. For instance, in order to base its pricing decisions on demand and cost considerations, a firm should have statistically derived or calculated demand and cost functions. Managerial economics also employs statistical methods for experimental testing of economic generalisations. The generalisations can be accepted in practice only when they are checked against the data from the world of reality and are found valid. Managers do not have exact information about the variables affecting decisions and have to deal with the uncertainty of future events. The theory of probability, upon which statistics is based, provides logic for dealing with such uncertainties.