1.2: Managerial Economics is Applicable to Different Types of Organizations

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In this book, the organization providing goods and services will often be called a “business” or a “firm,” terms that connote a for-profit organization. And in some portions of the book, we discuss principles that presume the underlying goal of the organization is to create profit. However, managerial economics is relevant to nonprofit organizations and government agencies as well as conventional, for-profit businesses. Although the underlying objective may change based on the type of organization, all these organizational types exist for the purpose of creating goods or services for persons or other organizations.

Managerial economics also addresses another class of manager: the regulator. As we will discuss in Chapter 8, the economic exchanges that result from organizations and persons trying to achieve their individual objectives may not result in the best overall pattern of exchange unless there is some regulatory guidance. Economics provides a framework for analyzing regulation, both the effect on decision making by the regulated entities and the policy decisions of the regulator.