The Principles of Managerial Economics

The scope of Managerial Economics & the Role / Responsibilities of Managers

The difference between Micro and Macro Economics
The Theory of the Firm
In neoclassical economics, the theory of the firm is a micro-economic concept. It states the firms exist & make
decisions to maximize profit. Modern economics takes on the theory of the firm sometimes distinguish between
long-run motivation such as sustainability & the short-run like profit maximization.

The various theories of the Firms:

1. Neoclassical Theory
2. Transaction Cost Theory
3. Evolutionary Theory
4. Principal Agent Theory
The 3 Main Types of Firms:
1. Sole Proprietorship
2. Partnership
3. Corporation
What are the limitations of the Theory of the Firm?
The limitations of the traditional theory of the firm is that it equates utility maximization with profit
maximization. But in the real world, it is much complex & there are many things that determines
managerial ability…. Managerial economics = Manager’s Ability
Let us end our session w this ……… Thank u for ur most precious time well spent.