Consumer theory is included in the chapter on demand theory, but a
separate chapter is dedicated to production theory, since otherwise the chapter
on cost theory would be too long. The main reason for this difference in
treatment is that many aspects of consumer theory relate to behavioural
psychology, and these are not normally discussed in managerial economics,
while production theory deals more in engineering concepts which economists
traditionally have been more willing to examine. The topics of demand
and cost analysis both involve separate chapters on theory and on estimation,
which is again a traditional distinction, but sometimes the relationship
between these two aspects is not fully explained. Since it is very important to
understand this relationship in order to appreciate the objectives and methods
involved in managerial economics, a section on methods now follows.