The study of an individual consumer or a firm is called microeconomics (also called the Theory of Firm).
Micro means ‘one millionth’. Microeconomics deals with behavior and problems of single individual and of
micro organization. Managerial economics has its roots in microeconomics and it deals with the micro or
individual enterprises. It is concerned with the application of the concepts such as price theory, Law of
Demand and theories of market structure and so on.
The study of ‘aggregate’ or total level of economics activity in a country is called macroeconomics. It studies
the flow of economics resources or factors of production (such as land, labour, capital, organisation and
technology) from the resource owner to the business firms and then from the business firms to the
households. It deals with total aggregates, for instance, total national income total employment, output and
total investment. It studies the interrelations among various aggregates and examines their nature and
behaviour, their determination and causes of fluctuations in the. It deals with the price level in general,
instead of studying the prices of individual commodities. It is concerned with the level of employment in the
economy. It discusses aggregate consumption, aggregate investment, price level, and payment, theories of
employment, and so on.
Though macroeconomics provides the necessary framework in term of government policies etc., for the firm
to act upon dealing with analysis of business conditions, it has less direct relevance in the study of theory of
Management is the science and art of getting things done through people in formally organized groups. It is
necessary that every organisation be well managed to enable it to achieve its desired goals. Management
includes a number of functions: Planning, organizing, staffing, directing, and controlling. The manager
while directing the efforts of his staff communicates to them the goals, objectives, policies, and procedures;
coordinates their efforts; motivates them to sustain their enthusiasm; and leads them to achieve the corporate
Welfare economics is that branch of economics, which primarily deals with taking of poverty, famine and
distribution of wealth in an economy. This is also called Development Economics. The central focus of
welfare economics is to assess how well things are going for the members of the society. If certain things
have gone terribly bad in some situation, it is necessary to explain why things have gone wrong. Prof.
Amartya Sen was awarded the Nobel Prize in Economics in 1998 in recognition of his contributions to
welfare economics. Prof. Sen gained recognition for his studies of the 1974 famine in Bangladesh. His work
has challenged the common view that food shortage is the major cause of famine.
In the words of Prof. Sen, famines can occur even when the food supply is high but people cannot buy the
food because they don’t have money. There has never been a famine in a democratic country because leaders