Traditional Economics and Managerial Economics

Traditional Economics and Managerial Economics

Relationship between Traditional Economics and Managerial Economics
Micro economics is the main source of concepts and analytical tools for managerial economics. Various micro-economic concepts such as elasticity of demand, marginal cost, the short and long runs, various market forms etc. are of great significance to managerial economics. The chief contribution of macroeconomics is in the area of forecasting. The modern theory of income and employment has direct implications for forecasting general business conditions. As the prospects of an individual firm often depend greatly on general business conditions, individual firm forecasts depend on general business forecasts. Business economists have found following economic concepts as useful and of frequent applications:

  1. Demand theory
  2. Theory of firm
  3. Business financing
  4. Public finance and fiscal policy
  5. Money and banking
  6. National income and social accounting
  7. Theory of international trade
  8. Economics of developing countries

Thus it is obvious that Managerial economics is very closely related to Traditional economics.
         Differences between Traditional Economics and Managerial Economics

Sr. No.

Traditional Economics

Managerial Economics


Includes both the micro economics and macro- economics. Micro in nature


Both positive and normative science. Only normative science
3. Deals with the study of concepts, principles and theoretical aspects of economic analysis

Deals with the application of economic principles to the problems of an individual firm.


Delas with theoretical aspects only Deals with practical aspects as well.
5. Considers only the economic factors affecting a problem

Considers both the economic and non economic factors


It studies rent, wages, interest and profit theories It lays emphasis on the theory of profit management only.


It does not depend on the process of decision making

Decision making is the most important task for Managerial Economics.

8. The scope of traditional Economics is very wide.

The scope is not much wide as it is only a branch of traditional Economics.


Scroll to top
You cannot copy content of this page. The content on this website is NOT for redistribution