9 Main Differences between Managerial Economics and Traditional Economics

Managerial Economics has been described as economics applied to decision-making. It may be viewed as a special branch of Economics. However, the main points of differences are the following:

1. The traditional Economics has both micro and macro aspects whereas Managerial Economics is essentially micro in character.

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2. Economics is both positive and normative science but the Managerial Economics is essentially normative in nature.

3. Economics deals mainly with the theoretical aspect only whereas Managerial Economics deals with the practical aspect.

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4. Managerial Economics studies the activities of an individual firm or unit. Its analysis of problems is micro in nature, whereas Economics analyzes problems both from micro and macro point of views.

5. Economics studies human behaviour on the basis of certain assumptions but these assumptions sometimes do not hold good in Managerial Economics as it concerns mainly with practical problems.


6. Under Economics we study only the economic aspect of the problems but under Managerial Economics we have to study both the economic and non-economic aspects of the problems.

7. Economics studies principles underlying rent, wages, interest and profits but in Managerial Economics we study mainly the principles of profit only.

8. Sound decision-making in Managerial Economics is considered to be the most important task for the improvement of efficiency of the business firm; but in Economics it is not so.

9. The scope of Managerial Economics is limited and not so wide as that of Economics.


Thus, it is obvious that Managerial Economics is very closely related to Economics but its scope is narrow as compared to Economics.

Managerial Economics is also closely related to other subjects, viz., Statistics, Mathematics and Accounting.

A trained managerial economist integrates concepts and methods from all these disciplines bringing them to bear on business problems of a firm.


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