Understanding and Learn, Explain the Difference between Traditional and Managerial Economics!
First, the Traditional economy is an original economic system in which traditions, customs, and beliefs help shape the goods and the services the economy produces, as well as the rules and manner of their distribution. Countries that use this type of economic system are often rural and farm-based. The concept of the study explains – What is traditional economics? Meaning, and What is Managerial economics? and their difference. Also learn, Explain the Difference between Traditional and Managerial Economics!
Also known as a subsistence economy, a traditional economy is defined by bartering and trading. A Little surplus is produced, and if any excess goods are made, they are typically given to a ruling authority or landowner.
After, Managerial economics is the “application of the economic concepts and economic analysis to the problems of formulating rational managerial decisions”. It is sometimes referred to as business economics and is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units.
What is traditional economics? Meaning.
Traditional economics refers to the more primitive principles of modern economics, which are commonly used in undeveloped countries, who have not yet embraced technical and globalization changes in the study of economics over the years. Traditional economics relies on the use of old cultures, trends, and customs in allocating rare resources to gain profit.
A traditional economy will definitely rely on the traditions of heritage and how the previous generations have made their production activities, will create the basis for the production of goods. The main production activities in the traditional economy include farming, livestock activities and hunting. In countries with such traditional economic systems, Papua New Guinea, South America, parts of Africa and the rural areas of Asia are included.
What is managerial economics? Meaning.
Managerial economics refers to the branch of economics, which is derived from the subject matter of microeconomics, which considers houses and firms in the economy, and macroeconomics related to employment rates, interest rates, inflation rates and other macroeconomic variables from the country Are related to the complete completion.
Managerial economics uses mathematics, statistics, management theory, economic data and modeling techniques to help business managers manage their operations with maximum efficiency. Managerial economics helps managers make the right decisions in the allocation of rare resources such as land, labor, capital to achieve high profitability while reducing costs. Managerial economics helps managers decide which products to produce, how much to produce, prices will be determined, and channels to use in sales and distribution.
The upcoming discussion will help you to differentiate between traditional and managerial economics.
The difference in Traditional Economics:
- The Traditional Economics has both Micro and Macro aspects.
- This is both positive (existing certain) and Normative Science.
- This deals with Theoretical aspects only.
- Here, problems are analyzed both from Micro and Macro point of view.
- It studies human behavior on the basis of certain assumptions, but these assumptions do not hold good in Managerial Economics.
- Here, we study only the economic aspects of the problems.
- Here, we study principles underlying rent, wages, interest and profits.
- Here, the efficiency of the firm is not studied.
- Traditional Economics scope is wide and it covers various areas.
The difference in Managerial Economics:
- It is essentially Micro in character.
- This is essentially Normative (setting standard) in nature.
- While it deals with Practical aspects.
- It studies the activities of an individual firm or unit.
- Managerial economics deals mainly with Practical problems.
- Here, both economic and non-economic aspects of the problems are studied.
- Here, we study mainly the principles of profit only.
- Here, the most important task is to study how to improve the efficiency of the firm.
- While the scope of Managerial Economics is limited and its scope is not so wide as that of Traditional Economics.
Another Main difference between Traditional and Managerial:
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:
- The traditional Economics has both micro and macro aspects whereas Managerial Economics is essentially micro in character.
- Economics is both positive and normative science but the Managerial Economics is essentially normative in nature.
- Economics deals mainly with the theoretical aspect only whereas Managerial Economics deals with the practical aspect.
- 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 the micro and macro point of views.
- Economics studies human behavior on the basis of certain assumptions but these assumptions sometimes do not hold good in Managerial Economics as it concerns mainly with practical problems.
- 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.
- Economics studies principles underlying rent, wages, interest, and profits but in Managerial Economics we study mainly the principles of profit only.
- Sound decision-making in Managerial Economics is considered to be the most important task for the improvement of the efficiency of the business firm, but in Economics it is not so.
- 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.
What is the difference between economics and managerial economics? Some Explanation.
Both managerial economics and traditional economics include production, distribution, and consumption of goods and services, and are reflected in the basic economic theory of using the factors of production effectively for production of both goods and services.
The main difference between the branches of economics is that traditional economics is ancient and its development is done in undeveloped and less technologically advanced economies, while the result of managerial economics globalization and the development of economics is involved in making managerial decisions.
Managerial economics uses sophisticated modeling systems and statistical data to make decisions regarding quantity, pricing and distribution channels, whereas, in traditional economics, the use of farming, hunting, and livestock activities is used by individuals in order to meet their daily consumption requirements. Includes.