For fixing the price of the products managers applies the pricing theories, cost and revenue theories of micro economics.It is the application of demand analysis to the real world situation. If a manager wants to increase the price of the product due to increase in cost of production, he will analyze the price elasticity of demand for that product so that price rise is not followed by substantial fall in the demand of the product.The reliance of Managerial Economics on Micro Economics is made clearer in the points below: Micro Economic Analysis is important as it is applied to day to day dilemma and concerns. for profit maximizing or for cost minimizing, is possible with proper compliance of micro economic know how, regardless of the technological constraints and given market conditions.
Optimum decision making to achieve the objective of the organisation i.e. Their business planning can be effectively planned and performed with comprehensive knowledge and understanding of micro economic concept and its applications. Managerial Economics applies the theories of Micro Economics to resolve the issues of the organization and for decision making.Īll Managers want to carry out their function of decision making with maximum efficiency. Demand Analysis and Forecasting, Theory of Price, Theory of Revenue and Cost, Theory of Supply and Production are major bare bones of Micro Economics that underpins the Managerial Economics. Managerial economics can be perceived as an applied Micro Economics. Almost all the concepts of Managerial Economics are the perceptions of Micro Economics concepts. Micro Economics forms the foundation of managerial economics. Micro Economics is a broader concept as compare to Managerial Economics. This economic environment is nothing but the Micro economics elements. Managerial Economics and Micro EconomicsĪll the firms operating in the market have to take under consideration the constituent of the economic environment for its proper functioning. Micro Economics is the study of the behaviour of individual consumers and firms whereas microeconomics is the study of economy as a whole. micro economics and macro economics are the major contributors to managerial economics. Managerial Economics is basically a blend of Economics and Management.
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