1. Explain how managerial economics is similar to and different from microeconomics.

Microeconomics and managerial economics are the sub-divisions of economics along with
others such as macroeconomics, behavioral economics, development economics,
environmental economics or financial economics. There are some fundamental similarities and
differences between these two subdivisions some of them are:

Difference

 Microeconomics is the study of a single or an individual unit of an economy. It focuses

on determining the market prices through demand and supply where the deciding units
are consumers and firms. Therefore, it pays attention to individuals' income and output.
On the other hand, managerial economics applies the economic theories and analytical
tools to provide choices for a firm. It deals with different methodologies and principles
for businesses to allocate scarce resources for decision-making.
 Microeconomics focuses on individuals, and is concerned with how and why people
make decisions. Managerial economics looks at what has been done in large businesses
and how changes can be made to help the business perform better.
 The two branches can also be differentiated on the basis of results produced by each.
microeconomics involves both firms and consumers, therefore it has a broader scope.
The effects of microeconomics are on an individual's behavior, which can be either
producer or consumer, but managerial economics narrows it down to businesses only.
 Microeconomics consists of both Positive economics which explains facts in the exact
manner in which they are, and what they will be and normative economics provides
value judgment and expresses an opinion on what it ought to be. Managerial
economics, however, is normative because it provides judgment on the outcomes of a
firm. It analyzes the future position of a firm so it does not contain any factual content.
 Managerial economics helps managers who direct limited resources including financial
and human resources, time and space to do their job more effectively. Managerial
economics provides concrete solutions, unlike microeconomics, which merely provides
explanations for instance, about how markets work.
 The primary use of microeconomics is to assess and evaluate supply and demand. While
that of Managerial economics is to evaluate and assess their production values,
marketing approaches, finance stability, sales, profits and revenues using math
formulas, such as Lagrangian calculus.

Similarities
 Both managerial economics and Micro Economics, problems of a particular organization
are looked upon rather than focusing on the whole economy.
 Microeconomics and managerial economics both encourage the use of quantitative
methods to analyze economic data.
 Microeconomics studies the actions of individual consumers and firms; managerial
economics is an applied specialty of this branch. Managerial economics applies
microeconomic theories and techniques to management decisions.