Solution:

Generally, it is believed that Managerial Economics is a blend of science and art because on one hand, it is a systematic study of economic concepts, principles, methods & tools, which are used in business decision-making process and on the other hand.

It is the study of how these are used and applied in best possible manner in analyzing and solving business problems.

In fact, science is a knowledge acquiring discipline, whereas arts is a knowledge applying discipline.

The following basic questions arise about the nature of Managerial Economics:

• Whether managerial economics is a science or an art or both:

• If it is a science- then it is a positive science or a normative science or both:

Managerial Economics is both knowledge acquiring and knowledge applying discipline. Thus, it can be concluded that managerial economics is science and arts both.

After knowing the answer of first question, we would examine whether the managerial economics is a positive science or a normative science or a blend of both.

Before knowing the answer of this question, we should understand the meaning of positive and normative science:

(1) Positive Science:

• Positive Science is a systematic knowledge of a particular subject wherein we study the cause and effect of an event.

• In other words, it explains the phenomenon as: What is, what was and what will be. Under the study of positive science, principles are formulated and they are tested on the yardstick of truth.

• From this point of view, managerial economics is also a positive science as it has its own principles/ theories/ laws by which cause and effect analysis of business events/activities is done, forecasts are made and their validities are also examined.

  (2) Normative Science:

• Normative Science studies things as they ought to be. Ethics, for example, is a normative science.

• The focus of study is „What should be‟. In other words, it involves value judgment or good and bad aspects of an event.

• Therefore, normative science is perspective rather than descriptive. It cannot not be neutral between ends.

Managerial economics is also a normative science as it suggests the best course of an action after comparing pros and cons of various alternatives available to a firm.

On the basis of the above arguments and facts, it can be said that managerial economics is a blending of positive science with normative science.