Micro vs macro economics12/17/2023 Tools such as supply, demand, consumer behavior, spending and purchasing power of people are used by economists to build models that they base their learnings on, one such model is the supply and demand curve. These decisions are made by the different agents in the economy and serve as the basis for microeconomists to study how they affect supply and demand and ultimately the economy as a whole. As individuals, we make numerous decisions everyday from what clothes to wear to what food to eat. This branch of economics focuses on how decisions made by people and organizations can affect the economy as a whole. Microeconomics was first introduced by the economist Adam Smith and is the study of the economy at a lower level, it is commonly termed the ‘bottom-up’ approach. Microeconomics is the study of the behavior of an individual, firm or household in the market while macroeconomics is the study of the economy as a whole- that is, the individuals, households and firms collectively. Theory of firm, an important element of microeconomics, is one of the most significant element of Managerial Economics.Each branch has its own policies and regulations relating to different sectors such as agriculture, labor market and the government.Managerial Economics also uses tools of Mathematical Economics and econometrics such as regression analysis, correlation analysis etc.Microeconomics is the study that deals with partial equilibrium analysis which is useful for the manager in deciding equilibrium for his organization.Study of welfare economics helps Manager in taking care of social responsibilities of the organization.Cost and benefit analysis helps the manager in decision making.One of the responsibilities of Manager is to workout budgets for different departments of the organization which is learned from Capital Budgeting and Capital Rationing.Managerial economics utilizes statistical methods such as game theory, linear programming etc for application of Economic Theory in Decision making.
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