(Loren 39).
Peter Klenow of Quarterly Review writes that microeconomics is the study of the behavior of individual consumers, firms, and industries and the distribution of production and income among them. It considers individuals both as suppliers of labor and capital and as the ultimate consumers of the final product. On the other hand, it analyzes firms both as suppliers of products and as consumers of labor and capital (Klenow 10).
The overriding goal of managerial economics and microeconomic theory is to make better business decisions. Microeconomics is the study of the economic behavior of individual consumers, firms, and industries and the distribution of production and income among them. It considers individuals both as suppliers of labor and capital and as the ultimate consumers of the final product. On the other hand, it analyzes firms both as suppliers of products and as consumers of labor and capital. Among the goals and objectives of managerial economics are the need to:
Measure the degree of risk involved in alternate decisions, adjust for risk, and indicate which decision is preferred by a risk-averse decision maker.
Understand the reaction of consumers to changes in incomes, preferences, prices and other economic variables.
Measure the response of market demand to changes in economic variables such as prices and incomes.
Derive estimates of the demand function facing the business firm or institution.
Explain the interaction of resources in the production process and the consequent shape of the cost curves.
Explain how the profit-maximizing price, or the price which serves other economic objectives, is determined in various market situations.
Apply knowledge of pricing in real-world situations, including the choice of the optimal markup rate.
Choose the optimal competitive strategy for a firm or institution to pursue, including the choice of the appropriate level of product quality, p...