Managerial Economics Versus Micro Economics

Managerial Economics Versus Micro Economics

To understand the difference between managerial economics and micro economics, you need to first understand what economics is.

Basically, it is the study of allotment of resources by businesses, individuals and government bodies in order to attain utmost satisfaction. They take decisions related to organisation of these resources and coordinate accordingly to achieve maximum output.

Both microeconomics and managerial economics are sub categories of economics. Of course, there are other sub-divisions as well.

Although Microeconomics and managerial economics both are an integral part of modern-day business operations, they both have different connotations. To apply both principles in your business enterprise aptly, you must understand the difference between the two clearly.

The note brings you a detailed differentiation between managerial and microeconomics. Read on to know how managerial economics differs from microeconomics.

Microeconomics and Microeconomics


Any firm which is operating in a market needs to consider every element of the economy in which it is functioning. This economic environment is also known as microeconomic elements. Microeconomics helps in determining prices of commodities by leveraging firms and consumers. The ultimate focus of microeconomics is on the output and income of individuals.

While managerial economics involves application of analytical tools and economic theories. It has multiple principles and methodologies so that allocation of scarce resources can be done for apt decision-making.

Basically, it would be right to say that microeconomics is a much wider term as compared to managerial economics. It forms the foundation of managerial economics. You can consider the concepts of managerial economics as the reflection of the microeconomics concepts.

It seems more like an application of the principles and elements of microeconomics. For instance, the theory of revenue and cost, theory of price, and theory of supply and production, each of these are the major elements of microeconomics which offer structure to managerial economics.


Microeconomics and managerial economics can be differentiated based on the results they offer. As mentioned above Microeconomics is a broader niche that comprises of customers as well as firms. However, the impact of applying managerial economics broadly impacts the firms only. Basically, after applying the principles of managerial economics, the eventual outcomes will help in taking smart and well-informed decisions for businesses.

Managers nowadays wish to go for a full-fledged decision-making process without hampering the performance of the business. The decision needs to be efficient enough. When he possesses an intricate knowledge of managerial economics, he can apply its concepts more conveniently for optimum business performance.

Cost minimising or profit maximising-both is the primary goal of managers. Both of these can be accomplished by applying managerial economics concepts. These concepts keep technical constraints at bay. Besides, they can overlook the ongoing market conditions and offer logical solutions to cope with the crisis.

Positive and normative economics

Microeconomics comprise of both positive as well as normative economics. However, managerial economics is normative in nature. Positive economics lays down facts as they are in real. Normative economics involve opinions and judgements.

Managerial economics is dependent on Micro economics:

  • In order to fix the prices of the commodities, managers are required to apply pricing theories, revenue theories and cost.
  • It is possible to determine the output as well as price in accordance with the approaches and structures of the market.
  • When a manager seeks to raise the price of a commodity because of increased expenses related to production, he will have to evaluate and analyse the price elasticity of demand. This evaluation assures that rise in price for the commodity does not lead to a fall in demand for the product.
  • Multiple factors should be put into consideration, such as type of technology available, raw material availability, manufacturing as well as supply of the commodity in the market etc., should be considered. All these details should be evaluated on the grounds of the theory of production.
  • Another responsibility of a manager is to allocate a budget for separate departments of the enterprise. This allocation is possible only when one has ample knowledge of capital rationing and capital budgeting.
  • Managerial economics also involves different types of statistical tactics, such as linear programming, game theory etc., for the purpose of applying economic theory for a flawless decision-making process.
  • It relies on mathematical economics as well as econometrics (correlation analysis, regression analysis and so on).
  • Managers, when learning about welfare economics, they become more capable of fulfilling their social responsibilities towards the enterprise.
  • Managers can reap the benefits of partial equilibrium analysis to create that ideal equilibrium in their enterprise.
  • Elaborate evaluation of cost and benefits can also offer ample support to the manager.

Wrapping up!

From these points, you can come to the conclusion that managerial economics is a mere part of micro economics. You can try and fulfil all the responsibilities as a manager for your enterprise if you understand the difference between micro and managerial economics. Learn the difference, understand how both rely on each other and offer balanced theories and principles for the managers to carry out business operations seamlessly.

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