Economics vs Managerial Economics
Economics is social science that is concerned with the production of goods and services, distribution and consumption of those goods and services, and transfer of wealth between entities within a country or across regions. The theory of economics in today’s world is a broad subject which is divided into microeconomics and macroeconomics. Managerial economics is based on both microeconomics and macroeconomics, whereas traditional economics refers to the concept of economics that is more traditional and primitive in nature. The following article clearly explains the difference between economics and managerial economics.
What is Managerial Economics?
Managerial economics refers to the branch of economics that is derived from the subject matter of microeconomics that considers the households and firms in an economy, and macroeconomics that is concerned with the employment rates, interest rates, inflation rates and other macroeconomic variables that concerns a country as a whole. Managerial economics makes the use of mathematics, statistics, management theories, economic data and modelling techniques in order to help business managers to carry out their operations with maximum efficiency. Managerial economics helps managers make the right decisions in the allocation of scarce resources such as land, labour, capital to achieve the highest profitability while minimizing costs. Managerial economics also helps managers decide which products to produce, how much to produce, prices to be set, and channels to use in the sales and distribution.
What is Traditional Economics?
Traditional economics refers to the more primitive principles of modern economics that are most commonly used in underdeveloped countries that have not yet embraced the rapid technological and globalization changes that have occurred in the study of economics over the years. Traditional economics relies on the use of old cultures, trends and customs in allocating scarce resources to obtain a benefit. A traditional economy will most definitely rely on customs of inheritance and base their production of goods on how the previous generations have carried out their production activities. The main production activities in a traditional economy include farming, pastoral activities, and hunting. Countries with such traditional economic systems include Papua New Guinea, South America, parts of Africa and rural areas in Asia.
What is the difference between Economics and Managerial Economics?
Both managerial economics and traditional economics involve the production, distribution, and consumption of goods and services, and are both reflected from the basic economic principle of using the factors of production in an efficient manner for the production of output of goods and services.
The main difference between the branches of economics is that traditional economics is primitive and is used in underdeveloped and less technologically advanced economies, whereas managerial economics is a result of globalization and evolution of economics to include managerial decision making. Managerial economics makes the use of sophisticated modelling systems and statistical data in decision making regarding production volumes, pricing and distribution channels, whereas traditional economics involves the use of farming, hunting, and pastoral activities by individuals to meet their daily consumption needs.
Summary:
Economics vs. Managerial Economics
• Traditional economics is employed by less developed nations with no sophisticated management systems, whereas managerial economics is used by modern day high-tech economies.
• Managerial economics is concerned with modelling systems and complex managerial decision making, whereas traditional economics is concerned with the production of food and other necessities to meet daily requirements of individuals.
• Managerial economics represents the development that a traditional economy has been through with globalization, development in technology and modernization of economic theories to suit managerial decision making.